-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, sE7lXA8ZOL9yrZhEFKfRW/yUKSsjq6E70luLY6H1mxDEQ1JuGMb8RMoTebS74nTa WYGxsRPVywuF/gd8hmNbVg== 0000891618-95-000009.txt : 19950608 0000891618-95-000009.hdr.sgml : 19950608 ACCESSION NUMBER: 0000891618-95-000009 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19941031 FILED AS OF DATE: 19950127 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEWLETT PACKARD CO CENTRAL INDEX KEY: 0000047217 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER & OFFICE EQUIPMENT [3570] IRS NUMBER: 941081436 STATE OF INCORPORATION: CA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04423 FILM NUMBER: 95503451 BUSINESS ADDRESS: STREET 1: 3000 HANOVER ST CITY: PALO ALTO STATE: CA ZIP: 94304 BUSINESS PHONE: 4158571501 10-K 1 FORM 10-K 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K (MARK ONE) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended October 31, 1994 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to Commission File Number: 1-4423
Exact name of registrant as specified in its charter: HEWLETT-PACKARD COMPANY STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION: California I.R.S. EMPLOYER IDENTIFICATION NO.: 94-1081436 ADDRESS OF PRINCIPAL EXECUTIVE OFFICES: 3000 Hanover Street, Palo Alto, California 94304 TELEPHONE NO.: (415) 857-1501 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - --------------------------------------- ------------------------------------------------------- Common Stock New York Stock Exchange, Inc. par value $1 London Stock Exchange per share Paris Bourse Tokyo Stock Exchange German (Frankfurt and Stuttgart) Stock Exchange Swiss (Zurich, Basel, Geneva and Lausanne) Stock Exchange Pacific Stock Exchange, Inc.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ The aggregate market value of the registrant's common stock held by nonaffiliates as of December 30, 1994 was $19,917,961,587. Indicate the number of shares outstanding of each of the issuer's classes of common stock as of December 30, 1994: 256,480,524 shares of $1 par value common stock. DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT DESCRIPTION 10-K PART - ---------------------------------------------------------------- ---------------- Pages 23-45 (excluding order data) and 48 and the inside back cover of the Registrant's 1994 Annual Report to Shareholders I, II, IV Pages 2-18 and 25 of the Registrant's Notice of Annual Meeting of Shareholders and Proxy Statement dated January 13, 1995 III
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I ITEM 1. BUSINESS. PRODUCTS AND SERVICES Hewlett-Packard Company was incorporated in 1947 under the laws of the State of California as the successor to a partnership founded in 1939 by William R. Hewlett and David Packard. Hewlett-Packard Company, together with its consolidated subsidiaries (the "Company"), is engaged worldwide in the design, manufacture and service of electronic equipment and systems for measurement, computation and communications. The Company offers a wide variety of systems and standalone products, including computer systems and peripheral products, electronic test equipment and systems, medical electronic equipment, calculators and other personal information products, solid state components and instrumentation for chemical analysis. These products are used in industry, business, engineering, science, education and medicine. A summary of the Company's net revenue as contributed by its major classes of products and services is found on page 44 of the Company's 1994 Annual Report to Shareholders, which page (excluding order data) is incorporated herein by reference. The Company's computers, computer systems, personal information products, personal peripheral products and other peripherals are used in a variety of applications, including scientific and engineering computation and analysis, instrument control and business information management. The Company's core computing products and technologies include its PA-RISC architecture for systems and workstations and software infrastructure for open systems. The Company's general-purpose computers and computer systems include scalable families of systems and servers for use in small workgroups, larger departments and entire data centers. Key products include the HP 9000 series, which runs HP-UX, HP's implementation of the UNIX(R)(1) operating system, and comprises both workstations with powerful computational and graphics capabilities and multiuser computers for both technical and commercial applications; and the HP Vectra series of IBM-compatible PCs (personal computers) for use in business, engineering, manufacturing and chemical analysis. The Company offers software programming services, network services, distributed system services and data management services. Customers of the Company's computers, computer systems and software infrastructure products include original equipment manufacturers, dealers, value-added resellers and retailers, as well as end users for a variety of applications. In the field of computing during fiscal 1994, the Company expanded its Corporate Business Systems product line, a family of multiuser systems and servers that spans products in both the HP 9000 and the HP 3000 series. The HP 9000 Model T500 Corporate Business Server runs the HP-UX operating system, while the new HP 3000 Corporate Business Systems run the POSIX-compliant MPE/iX operating system. Also introduced this year were the HP 9000 E-class business servers, which extend the HP 9000 family of PA-RISC-based workstations and servers. Other introductions included models 712/60 and 712/80i of the Series 700 family of workstations, which are the first implementations of the Company's PA-7100LC microprocessor, also introduced this year; the HP ENTRIA family of X terminals; the HP Vectra VL2 series of PCs and the HP Vectra 486/25VL Model 170MM PC, the Company's first multimedia PC; and a series of HP Vectra PC servers. Software introductions included HP OpenView Version 3.3, which includes more than 30 enhancements to the Company's network- and systems-management platform; the COBOL SoftBench and COBOL/C SoftBench software-development environments, which are based on HP SoftBench, the open, integrated CASE (computer-aided-software-engineering) environment that is a de facto standard; and HP Odapter, software that allows Oracle7 relational databases to store objects created by object-oriented applications. - --------------- (1) UNIX is a registered trademark in the United States and other countries, licensed exclusively through X/Open(TM) Company Limited. X/Open is a trademark of X/Open Company Limited in the UK and other countries. 3 The Company's peripheral products include a variety of system and desktop printers, such as the HP LaserJet family; the HP DeskJet family, which is based on the Company's thermal inkjet technology; a family of graphic plotters and page scanners; video display terminals; disk (magnetic and optical) and tape drives and related autochangers. In fiscal 1994 the Company introduced the HP LaserJet 4 Plus and 4M Plus printers, 12-page-per-minute printers that replaced the LaserJet 4 and 4M printers and are 30 to 40 percent faster than their predecessors; the HP LaserJet 4V, HP's fastest desktop laser printer; the HP Color LaserJet printer, which gives corporate computer users the print quality, speed and ease of use of a LaserJet at an affordable price; the HP DeskJet 560C and DeskWriter 560C for Macintosh computers, which use an HP-developed technology called ColorSmart for easier and more vivid full-color printing; the HP DeskJet 540 and HP DeskWriter 540 printers, the lowest-priced DeskJet printers that are targeted at the rapidly growing home market; the DeskJet 320 printer for notebook PCs and the DeskWriter 320 printer for Macintosh PowerBooks; the HP ScanJet IIcx scanner, which brought desktop scanning to a wide range of business communicators; and the HP OfficeJet printer-fax-copier, the first product from HP to perform all three functions. The Company also produces measurement systems for use in electronics, medicine and analytical chemistry. Test and measurement instruments include voltmeters and multimeters that measure voltage, current and resistance; counters that measure the frequency of an electrical signal; oscilloscopes and logic analyzers that measure electrical changes in relation to time; signal generators that provide the electrical stimulus for the testing of systems and components; specialized communications and semiconductor test equipment; and atomic frequency standards, which are used in accurate time-interval and timekeeping applications. Instruments for medical applications include continuous monitoring systems for critical-care patients, medical data-management systems, fetal monitors, electrocardiographs, cardiac catheterization laboratory systems, blood gas measuring instruments, diagnostic ultrasonic imaging systems and cardiac defibrillators. Instruments for analytical applications include gas and liquid chromatographs, mass spectrometers, laboratory data systems and spectrophotometers. Key product introductions for measurement systems in fiscal 1994 included the first test set to measure waveform quality for CDMA, a new U.S. standard for digital-cellular communications; the HP AcceSS7 Monitoring System, an open-systems platform that monitors Signaling System #7 networks, which are the distributed computers and databases that control call routing in telecommunications; the HP CareVue Clinical Event Review, a workstation-based system that enables clinicians to specify and retrieve patient data more quickly than before; and a liquid chromatograph/mass spectrometer that helps bioscientists analyze biomolecules. The Company continues to demonstrate its ability to combine measurement and computation. The Company's Unified Laboratory strategy is designed to improve a user's productivity by allowing computers in the analytical laboratory to serve as adjuncts to analytical instrumentation while broadening the user's ability to communicate with other parts of the organization. The Office of the Chemist is a subset of the Unified Laboratory in which an office-based workstation or PC, with business software such as spreadsheets, is combined with analytical equipment and data to allow a chemist to work more efficiently. The Company's Clinical Information System combines patient data from monitoring instruments with other information to assist nurses in providing health care. The Company also manufactures electronic component products consisting principally of microwave semiconductor, fiber-optic and optoelectronic devices, including LEDs (light-emitting diodes). The products primarily are sold to other manufacturers for incorporation into their electronic products but also are used in many of the Company's products. In fiscal 1994, the Company introduced transistors, integrated circuits and surface-mount diodes for radio-frequency communications, a transmitter/receiver for infrared communications, and red-orange LEDs that are the world's brightest. The Company provides service for its equipment, systems and peripherals, including support and maintenance services, parts and supplies for design and manufacturing systems, office and information systems, general-purpose instruments, computers and computer systems, peripherals and network products. During fiscal 1994, the Company derived 23 percent of its net revenue from such services. The Company strives, in all its businesses, to promote industry standards that recognize customer preferences for open systems in which different vendors' products can work together. The Company often 2 4 bases its product innovations on such standards and seeks to make its technology innovations into industry standards through licensing to other companies and standards-setting groups. For example, during fiscal 1994 the Company's Demand Priority protocol specification for 100VG-AnyLAN, a technology for high-speed local area networks, was accepted by a working group of the IEEE, a key standard-setting body. MARKETING Customers. The Company has approximately 600 sales and support offices and distributorships in more than 120 countries. Sales are made to industrial and commercial customers, educational and scientific institutions, healthcare providers (including individual doctors, hospitals, clinics and research laboratories) and, in the case of its calculators and other personal information products, computer peripherals and PCs, to individuals for personal use. Sales Organization. More than half of the Company's orders are derived through value-added resale channels, including dealers and original equipment manufacturers. The remaining product orders result from the efforts of its own sales organization selling to end users. In fiscal 1994 a higher portion of the Company's net revenue than in fiscal 1993 was generated from products such as personal peripherals, which are primarily sold through dealers and other value-added resellers. Sales operations are supported by approximately 34,000 individuals, including field service engineers, sales representatives, service personnel and administrative support staff. International. The Company's total orders originating outside of the United States as a percentage of total Company orders were approximately 54 percent in fiscal 1994 and fiscal 1993, and 55 percent in fiscal 1992. The majority of these international orders were from customers other than foreign governments. Approximately two-thirds of the Company's international orders in each of the last three fiscal years were derived from Europe, with most of the balance coming from Japan, other countries in Asia Pacific, Latin America and Canada. Most of the Company's sales in international markets are made by foreign sales subsidiaries. In countries with low sales volume, sales are made through various representative and distributorship arrangements. Certain sales in international markets, however, are made directly by the parent Company from the United States. The Company's international business is subject to risks customarily encountered in foreign operations, including fluctuations in monetary exchange rates, import and export controls and the economic, political and regulatory policies of foreign governments. The Company believes that its international diversification provides stability to its worldwide operations and reduces the impact on the Company of adverse economic changes in any single country. A summary of the Company's net revenue, earnings from operations and identifiable assets by geographic area is found on page 42 of the Company's 1994 Annual Report to Shareholders, which page is incorporated herein by reference. COMPETITION The Company encounters aggressive competition in all areas of its business activity. Its competitors are numerous, ranging from some of the world's largest corporations to many relatively small and highly specialized firms. The Company competes primarily on the basis of technology, performance, price, quality, reliability, distribution and customer service and support. The Company's reputation, the ease of use of its products and the ready availability of customer training are also important competitive factors. The computer market is characterized by vigorous competition among major corporations with long-established positions and a large number of new and rapidly growing firms. While the absence of reliable statistics makes it difficult to state the Company's relative position, the Company believes that it is the second-largest U.S.-based manufacturer of general-purpose computers, personal peripherals such as desktop printers, and calculators and other personal information products, all for industrial, scientific and business applications. The markets for test and measurement instruments are influenced by specialized manufacturers which often have great strength in narrow market segments. In general, however, the Company believes that it is one of the principal suppliers in these markets. 3 5 BACKLOG The Company believes that backlog is not a meaningful indicator of future business prospects due to the volume of products delivered from shelf inventories, the shortening of product delivery schedules, and the portion of revenue related to its service and support business. Therefore, the Company believes that backlog information is not material to an understanding of its business. PATENTS The Company's general policy has been to seek patent protection for those inventions and improvements likely to be incorporated into its products or to give the Company a competitive advantage. While the Company believes that its patents and applications have value, in general no single patent is in itself essential. The Company believes that its technological position depends primarily on the technical competence and creative ability of its research and development personnel. MATERIALS The Company's manufacturing operations employ a wide variety of semiconductors, electro-mechanical components and assemblies, and raw materials such as plastic resins and sheet metal. The Company believes that the materials and supplies necessary for its manufacturing operations are presently available in the quantities required. The Company purchases materials, supplies and product sub-assemblies from a substantial number of vendors. For many of its products, the Company has existing alternate sources of supply, or such sources are readily available. A portion of the Company's manufacturing operations is dependent on the ability of significant suppliers to deliver integral sub-assemblies and components in time to meet critical manufacturing schedules. The failure of suppliers to deliver these sub-assemblies and components in a timely manner may adversely affect the Company's operating results until alternate sourcing could be developed. The Company believes that alternate suppliers or design solutions could be arranged within a reasonable time so that material long-term adverse impacts would be unlikely. RESEARCH AND DEVELOPMENT The process of developing new high technology products is complex and uncertain and requires innovative designs that anticipate customer needs and technological trends. After the products are developed, the Company must quickly manufacture products in sufficient volumes at acceptable costs to meet demand. Expenditures for research and development amounted to $2.0 billion in fiscal 1994, $1.8 billion in fiscal 1993 and $1.6 billion in fiscal 1992. In fiscal 1994, research and development expenditures were 8.1 percent of net revenue. ENVIRONMENT The operations of the Company involve the use of substances regulated under various federal, state and international laws governing the environment. It is the Company's policy to apply strict standards for environmental protection to sites inside and outside the U.S., even if not subject to regulations imposed by local governments. Liability for environmental remediation is accrued when it is considered probable and costs can be reasonably estimated. Environmental expenditures are presently not material to HP's operations or financial position. EMPLOYEES The Company had approximately 98,400 employees worldwide at October 31, 1994. 4 6 ITEM 2. PROPERTIES. The principal executive offices of the Company are located at 3000 Hanover Street, Palo Alto, California 94304. As of October 31, 1994, the Company owned or leased a total of approximately 42.7 million square feet of space worldwide. The Company believes that its existing properties are in good condition and suitable for the conduct of its business. The Company's plants are equipped with machinery, most of which is owned by the Company and is in part developed by it to meet the special requirements for manufacturing precision electronic instruments and systems. At the end of fiscal year 1994 the Company was productively utilizing the vast majority of the space in its facilities, while actively disposing of space determined to be excess. The Company anticipates that most of the capital necessary for expansion will continue to be obtained from internally generated funds. Investment in new property, plant and equipment amounted to $1.3 billion in fiscal 1994, $1.4 billion in fiscal 1993 and $1.0 billion in fiscal 1992. As of October 31, 1994, the Company's marketing operations occupied approximately 10.4 million square feet, of which 3.5 million square feet are located within the United States. The Company owns 53% of the space used for marketing activities and leases the remaining 47%. The Company's manufacturing plants, research and development facilities and warehouse and administrative facilities occupied 32.3 million square feet, of which 22.6 million square feet are located within the United States. The Company owns 74% of its manufacturing, research and development, warehouse and administrative space and leases the remaining 26%. None of the property owned by the Company is held subject to any major encumbrances. The locations of the Company's geographic operations are listed on the inside back cover of the Company's 1994 Annual Report to Shareholders, which page is incorporated herein by reference. The locations of the Company's major product development and manufacturing facilities and the HP Laboratories are listed below: PRODUCT DEVELOPMENT AND MANUFACTURING Americas Cupertino, Folsom, Mountain View, Newark, Palo Alto, Rohnert Park, Roseville, San Diego, San Jose, Santa Clara, Santa Rosa, Sunnyvale and Westlake Village, California Colorado Springs, Fort Collins, Greeley and Loveland, Colorado Wilmington, Delaware Boise, Idaho Andover and Chelmsford, Massachusetts Exeter, New Hampshire Rockaway, New Jersey Corvallis and McMinnville, Oregon Aguadilla, Puerto Rico Everett, Spokane and Vancouver, Washington Edmonton, Calgary, Montreal and Waterloo, Canada Guadalajara, Mexico Europe Grenoble and L'Isle d'Abeau, France Boblingen and Waldbronn, Germany Bergamo, Italy Amersfoort, The Netherlands Barcelona, Spain Bristol, Ipswich and South Queensferry, United Kingdom Asia Pacific Melbourne, Australia Beijing, Qingdao and Shenzhen, China Bangalore, India Hachioji and Kobe, Japan Seoul, Korea Penang, Malaysia Singapore HEWLETT-PACKARD LABORATORIES Palo Alto, California Tokyo, Japan Bristol, United Kingdom 5 7 ITEM 3. LEGAL PROCEEDINGS. There are presently pending no legal proceedings, other than routine litigation incidental to the Company's business, to which the Company is a party or to which any of its property is subject. The Company is a party to, or otherwise involved in, proceedings brought by federal or state environmental agencies under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), known as "Superfund," or state laws similar to CERCLA. The Company is also conducting environmental investigation or remediation at several of its current or former operating sites pursuant to administrative orders or consent agreements with state environmental agencies. Any future liability from such proceedings, in the aggregate, is not expected to be material to the operations or financial position of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. Information regarding the market prices of the Company's common stock and the markets for that stock may be found on pages 45 and 48, respectively, of the Company's 1994 Annual Report to Shareholders. The number of shareholders and information concerning the Company's current dividend rate are set forth in the section entitled "Common Stock, Dividend Policy" found on page 48 of that report. Additional information concerning dividends may be found on pages 23, 30, 31 and 45 of the Company's 1994 Annual Report to Shareholders. Such pages (excluding order data) are incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA. Selected financial data for the Company is set forth on page 23 of the Company's 1994 Annual Report to Shareholders, which page (excluding order data) is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. A discussion of the Company's financial condition, changes in financial condition and results of operations appears in the "Financial Review" found on pages 25-27 and 29 of the Company's 1994 Annual Report to Shareholders. Such pages are incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The consolidated financial statements of the Company, together with the report thereon of Price Waterhouse LLP, independent accountants, and the unaudited "Quarterly Summary" are set forth on pages 24, 28, 30-43 and 45 of the Company's 1994 Annual Report to Shareholders, which pages (excluding order data and "Statement of Management Responsibility") are incorporated herein by reference. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. With the exception of the information incorporated by reference in Parts I, II and IV of this Form 10-K, the Company's 1994 Annual Report to Shareholders is not to be deemed filed as part of this report. 6 8 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information regarding directors of the Company is set forth under "Election of Directors" on pages 4-8 of the Company's Notice of Annual Meeting of Shareholders and Proxy Statement, dated January 13, 1995 (the "Notice and Proxy Statement"), which pages are incorporated herein by reference. The names of the executive officers of the Company, their ages, titles and biographies as of December 30, 1994, are set forth below. All officers are elected for a one-year term. EXECUTIVE OFFICERS: JAMES L. ARTHUR; AGE 60; SENIOR VICE PRESIDENT AND GENERAL MANAGER, WORLDWIDE CUSTOMER SUPPORT OPERATIONS. Mr. Arthur assumed his current position as General Manager of the Company's Worldwide Customer Support Operations in 1989. He served as Director of the U.S. Field Operations from 1984 to 1989. He became a Vice President of the Company in 1982 and a Senior Vice President in 1987. EDWARD W. BARNHOLT; AGE 51; SENIOR VICE PRESIDENT AND GENERAL MANAGER, TEST AND MEASUREMENT ORGANIZATION. Mr. Barnholt was elected a Senior Vice President in 1993. He became Vice President and General Manager, Test and Measurement Organization, with responsibility for the Company's Electronic Instrument and Microwave and Communications Groups, along with the Communications Test Business Unit, in 1990. Prior to 1990, he had been General Manager of the Electronic Instrument Group since 1984. Mr. Barnholt was elected a Vice President of the Company in 1988. RICHARD E. BELLUZZO; AGE 41; VICE PRESIDENT AND GENERAL MANAGER, COMPUTER PRODUCTS ORGANIZATION. Mr. Belluzzo was named General Manager of the Computer Products Organization in 1993. Earlier in 1993 he became General Manager of the newly formed Hardcopy Products Group. He was elected a Vice President in 1992. He was named operations manager for the Boise Printer Operation when it was formed in 1987 and became General Manager of that operation when it became a division in 1988. ALAN D. BICKELL; AGE 58; SENIOR VICE PRESIDENT AND MANAGING DIRECTOR, GEOGRAPHIC OPERATIONS. Mr. Bickell was elected a Vice President in 1984. He was Managing Director of Intercontinental Operations from 1974 until 1992, when he was elected to his current position. JOEL S. BIRNBAUM; AGE 57; SENIOR VICE PRESIDENT, RESEARCH AND DEVELOPMENT. Mr. Birnbaum was elected a Senior Vice President in 1993. He became Vice President, Research and Development and Director, HP Laboratories in September 1991. Additionally, he served as General Manager, Information Architecture Group from 1988 until 1991. He was elected a Vice President in 1984. He is a director of Corporation for National Research Infrastructure. S.T. JACK BRIGHAM III; AGE 55; VICE PRESIDENT, CORPORATE AFFAIRS AND GENERAL COUNSEL. Mr. Brigham was elected a Vice President in 1982 and became Vice President, Corporate Affairs in 1992. He has served as General Counsel since 1976. DOUGLAS K. CARNAHAN; AGE 53; VICE PRESIDENT AND GENERAL MANAGER, MEASUREMENT SYSTEMS ORGANIZATION. Mr. Carnahan was elected a Vice President in 1992. He was General Manager of the Publishing Products Business Unit from 1988 to 1991, when he was promoted to General Manager of the Printing Systems Group. 7 9 In June 1993 he was named General Manager of Component Products, and in October 1993 he assumed his current post as General Manager of the Measurement Systems Organization. RAYMOND W. COOKINGHAM; AGE 51; VICE PRESIDENT AND CONTROLLER. Mr. Cookingham was elected a Vice President in 1993. He has served as Controller for the Company since 1986. F. E. (PETE) PETERSON; AGE 53; VICE PRESIDENT, PERSONNEL. Mr. Peterson was elected to his current position in 1992. In 1985, he was named Corporate Personnel Operations Manager with responsibility for integrating personnel policies and programs with the worldwide business strategies of the Company. In 1990, he assumed additional responsibility as Director of Corporate Personnel. LEWIS E. PLATT; AGE 53; CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER, AND CHAIRMAN OF THE EXECUTIVE COMMITTEE. Mr. Platt has served as a director of the Company, President and Chief Executive Officer since November 1, 1992. The Board elected Mr. Platt to succeed David Packard as Chairman in September 1993. He was an Executive Vice President from 1987 to 1992. Mr. Platt held a number of management positions in the Company prior to becoming its President, including managing the Computer Systems Organization from 1990 to 1992 and the Computer Products sector from 1988 to 1990. He is a director of Molex Inc. and Pacific Telesis. He also serves on the Cornell University Council and the Wharton School Board of Overseers. WILLEM P. ROELANDTS; AGE 49; SENIOR VICE PRESIDENT AND GENERAL MANAGER, COMPUTER SYSTEMS ORGANIZATION. Mr. Roelandts was elected a Senior Vice President in 1993. He served as General Manager of the Computer Systems Group from 1988 until he became General Manager of the Networked Systems Group in the Computer Systems Organization in 1990. He was elected a Vice President and General Manager, Computer Systems Organization in 1992. ROBERT P. WAYMAN; AGE 49; EXECUTIVE VICE PRESIDENT, FINANCE AND ADMINISTRATION AND CHIEF FINANCIAL OFFICER. Mr. Wayman was elected a director of the Company effective December 1, 1993. He has been an Executive Vice President responsible for finance and administration since 1992. He has held a number of financial management positions in the Company and was elected a Vice President and Chief Financial Officer in 1984. He is a director of Consolidated Freightways, Inc. He also serves as a member of the Board of the Private Sector Council and of the Kellogg Advisory Board, Northwestern University. Information regarding compliance with Section 16(a) of the Securities Exchange Act of 1934 is set forth on page 11 of the Notice and Proxy Statement, which page is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. Information regarding the Company's compensation of its executive officers is set forth on pages 12-18 and 25 of the Notice and Proxy Statement, which pages are incorporated herein by reference. Information regarding the Company's compensation of its directors is set forth on pages 2-4 of the Notice and Proxy Statement, which pages are incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information regarding security ownership of certain beneficial owners and management is set forth on pages 8-11 of the Notice and Proxy Statement, which pages are incorporated herein by reference. 8 10 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information regarding transactions with the Company's executive officers and directors is set forth on page 25 of the Notice and Proxy Statement, which page is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) The following documents are filed as part of this report: 1. Financial Statements:
PAGE IN ANNUAL REPORT TO SHAREHOLDERS* ------------- Report of Independent Accountants.......................... 43 Consolidated Statement of Earnings for the three years ended October 31, 1994................................... 24 Consolidated Balance Sheet at October 31, 1994 and 1993.... 28 Consolidated Statement of Cash Flows for the three years ended October 31, 1994................................... 30 Consolidated Statement of Shareholders' Equity for the three years ended October 31, 1994....................... 31 Notes to Consolidated Financial Statements................. 32-42
- --------------- * Incorporated by reference from the indicated pages of the 1994 Annual Report to Shareholders. 2. Financial Statement Schedules: None. 9 11 3. Exhibits: 1. Not applicable. 2. None. 3(a). Registrant's Amended Articles of Incorporation, which appear as Exhibit 3(a) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1988, which Exhibit is incorporated herein by reference. 3(b). Registrant's Amended By-Laws, which appear as Exhibit 3(b) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1992, which Exhibit is incorporated herein by reference. 4. None. 5-8. Not applicable. 9. None. 10(a). Registrant's 1979 Incentive Stock Option Plan, which appears as Exhibit 10(a) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1983, which Exhibit is incorporated herein by reference.* 10(b). Registrant's 1979 Incentive Stock Option Plan Agreements, which appear as Exhibit 10(b) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1983, which Exhibit is incorporated herein by reference.* 10(c). Letter dated September 24, 1984 to optionees advising them of amendment to 1979 Incentive Stock Option Plan Agreement (Exhibit 10(b) above), which appears as Exhibit 10(c) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1984, which Exhibit is incorporated herein by reference.* 10(d). Registrant's 1983 Officers Early Retirement Plan, amended and restated as of January 1, 1990 which appears as Exhibit 10(d) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1990, which Exhibit is incorporated herein by reference.* 10(e). Registrant's 1985 Incentive Compensation Plan, which appears as Exhibit 10(e) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1984, which Exhibit is incorporated herein by reference.* 10(f). Registrant's 1985 Incentive Compensation Plan Stock Option Agreements, which appear as Exhibit 10(f) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1984, which Exhibit is incorporated herein by reference.* 10(g). Registrant's Excess Benefit Retirement Plan, amended and restated as of November 1, 1989, which appears as Exhibit 10(g) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1990, which Exhibit is incorporated herein by reference.* 10(h). Registrant's 1985 Incentive Compensation Plan restricted stock agreements, which appear as Exhibit 10(h) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1985, which Exhibit is incorporated herein by reference.* 10(i). Registrant's 1987 Director Option Plan, which appears as Appendix A to Registrant's Proxy Statement dated January 16, 1987, which Appendix is incorporated herein by reference.* 10(j). Registrant's 1989 Independent Director Deferred Compensation Program, which appears as Exhibit 10(j) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1989, which Exhibit is incorporated herein by reference.* 10(k). Registrant's 1990 Incentive Stock Plan, which appears as Appendix A to Registrant's Proxy Statement dated January 11, 1990, which Appendix is incorporated herein by reference.*
10 12 10(l). Registrant's 1990 Incentive Stock Plan stock option and restricted stock agreements, which appear as Exhibit 10(l) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1990, which Exhibit is incorporated herein by reference.* 10(m). Resolution dated July 17, 1991 adopting amendment to Registrant's 1979 Incentive Stock Option Plan, which appears as Exhibit 10(m) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1991, which Exhibit is incorporated herein by reference.* 10(n). Resolution dated July 17, 1991 adopting amendment to Registrant's 1985 Incentive Compensation Plan, which appears as Exhibit 10(n) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1991, which Exhibit is incorporated herein by reference.* 10(o). Resolution dated July 17, 1991 adopting amendment to Registrant's 1987 Director Option Plan, which appears as Exhibit 10(o) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1991, which Exhibit is incorporated herein by reference.* 10(p). Resolution dated July 17, 1991 adopting amendment to Registrant's 1990 Incentive Stock Plan, which appears as Exhibit 10(p) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1991, which Exhibit is incorporated herein by reference.* 10(q). Registrant's 1995 Incentive Stock Plan, which appears as Appendix A to Registrant's Proxy Statement dated January 13, 1995, which Appendix is incorporated herein by reference.* 11-12. None. 13. Pages 23-45 (excluding order data and "Statement of Management Responsibility") and 48 and the inside back cover of Registrant's 1994 Annual Report to Shareholders. 14-17. Not applicable. 18. None. 19-20. Not applicable. 21. Subsidiaries of Registrant as of January 16, 1995. 22. None. 23. Consent of Independent Accountants. 24. Powers of Attorney. Contained in page 12 of this Annual Report on Form 10-K and incorporated herein by reference. 25-26. Not applicable. 27. Financial Data Schedule. 28. None. 99. 1994 Employee Stock Purchase Plan Annual Report on Form 11-K.
- --------------- * Indicates management contract or compensatory plan, contract or arrangement. Exhibit numbers may not correspond in all cases to those numbers in Item 601 of Regulation S-K because of special requirements applicable to EDGAR filers. (b) Reports on Form 8-K None. 11 13 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. HEWLETT-PACKARD COMPANY Date: January 27, 1995 By: D. CRAIG NORDLUND --------------------------------- D. CRAIG NORDLUND ASSOCIATE GENERAL COUNSEL AND SECRETARY
POWER OF ATTORNEY Know All Persons By These Presents, that each person whose signature appears below constitutes and appoints D. Craig Nordlund and Ann O. Baskins, or either of them, his or her attorneys-in-fact, for such person in any and all capacities, to sign any amendments to this report and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that either of said attorneys-in-fact, or substitute or substitutes, may do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - ------------------------------------- --------------------------------- ------------------ RAYMOND W. COOKINGHAM Vice President and Controller January 20, 1995 - ------------------------------------- (Principal Accounting Officer) RAYMOND W. COOKINGHAM THOMAS E. EVERHART Director January 19, 1995 - ------------------------------------- THOMAS E. EVERHART JOHN B. FERY Director January 20, 1995 - ------------------------------------- JOHN B. FERY JEAN-PAUL G. GIMON Director January 20, 1995 - ------------------------------------- JEAN-PAUL G. GIMON RICHARD A. HACKBORN Director January 20, 1995 - ------------------------------------- RICHARD A. HACKBORN HAROLD J. HAYNES Director January 20, 1995 - ------------------------------------- HAROLD J. HAYNES WALTER B. HEWLETT Director January 20, 1995 - ------------------------------------- WALTER B. HEWLETT SHIRLEY M. HUFSTEDLER Director January 20, 1995 - ------------------------------------- SHIRLEY M. HUFSTEDLER
12 14
SIGNATURE TITLE DATE - ------------------------------------- --------------------------------- ------------------ Director - ------------------------------------- GEORGE A. KEYWORTH II PAUL F. MILLER, JR. Director January 20, 1995 - ------------------------------------- PAUL F. MILLER, JR. SUSAN P. ORR Director January 20, 1995 - ------------------------------------- SUSAN P. ORR DAVID W. PACKARD Director January 20, 1995 - ------------------------------------- DAVID W. PACKARD DONALD E. PETERSEN Director January 20, 1995 - ------------------------------------- DONALD E. PETERSEN LEWIS E. PLATT Chairman, President and Chief January 23, 1995 - ------------------------------------- Executive Officer (Principal LEWIS E. PLATT Executive Officer) ROBERT P. WAYMAN Executive Vice President, Finance January 20, 1995 - ------------------------------------- and Administration, Chief ROBERT P. WAYMAN Financial Officer and Director (Principal Financial Officer)
13 15 5963-5439EUS 16 EXHIBIT INDEX EXHIBIT NUMBER EXHIBIT - ------- ------- 1. Not applicable. 2. None. 3(a). Registrant's Amended Articles of Incorporation, which appear as Exhibit 3(a) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1988, which Exhibit is incorporated herein by reference. 3(b). Registrant's Amended By-Laws, which appear as Exhibit 3(b) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1992, which Exhibit is incorporated herein by reference. 4. None. 5-8. Not applicable. 9. None. 10(a). Registrant's 1979 Incentive Stock Option Plan, which appears as Exhibit 10(a) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1983, which Exhibit is incorporated herein by reference. 10(b). Registrant's 1979 Incentive Stock Option Plan Agreements, which appear as Exhibit 10(b) to Registrant's Annual Report on Form 10- K for the fiscal year ended October 31, 1983, which Exhibit is incorporated herein by reference. 10(c). Letter dated September 24, 1984 to optionees advising them of amendment to 1979 Incentive Stock Option Plan Agreement (Exhibit 10(b) above), which appears as Exhibit 10(c) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1984, which Exhibit is incorporated herein by reference. 10(d). Registrant's 1983 Officers Early Retirement Plan, amended and restated as of January 1, 1990 which appears as Exhibit 10(d) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1990, which Exhibit is incorporated herein by reference. 10(e). Registrant's 1985 Incentive Compensation Plan, which appears as Exhibit 10(e) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1984, which Exhibit is incorporated herein by reference. 10(f). Registrant's 1985 Incentive Compensation Plan Stock Option Agreements, which appear as Exhibit 10(f) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1984, which Exhibit is incorporated herein by reference. 10(g). Registrant's Excess Benefit Retirement Plan, amended and restated as of November 1, 1989, which appears as Exhibit 10(g) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1990, which Exhibit is incorporated herein by reference. 17 EXHIBIT NUMBER EXHIBIT - ------- ------- 10(h). Registrant's 1985 Incentive Compensation Plan restricted stock agreements, which appear as Exhibit 10(h) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1985, which Exhibit is incorporated herein by reference. 10(i). Registrant's 1987 Director Option Plan, which appears as Appendix A to Registrant's Proxy Statement dated January 16, 1987, which Appendix is incorporated herein by reference. 10(j). Registrant's 1989 Independent Director Deferred Compensation Program, which appears as Exhibit 10(j) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1989, which Exhibit is incorporated herein by reference. 10(k). Registrant's 1990 Incentive Stock Plan, which appears as Appendix A to Registrant's Proxy Statement dated January 11, 1990, which Appendix is incorporated herein by reference. 10(l). Registrant's 1990 Incentive Stock Plan stock option and restricted stock agreements, which appear as Exhibit 10(l) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1990, which Exhibit is incorporated herein by reference. 10(m). Resolution dated July 17, 1991 adopting amendment to Registrant's 1979 Incentive Stock Option Plan, which appears as Exhibit 10(m) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1991, which Exhibit is incorporated herein by reference. 10(n). Resolution dated July 17, 1991 adopting amendment to Registrant's 1985 Incentive Compensation Plan, which appears as Exhibit 10(n) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1991, which Exhibit is incorporated herein by reference. 10(o). Resolution dated July 17, 1991 adopting amendment to Registrant's 1987 Director Option Plan, which appears as Exhibit 10(o) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1991, which Exhibit is incorporated herein by reference. 10(p). Resolution dated July 17, 1991 adopting amendment to Registrant's 1990 Incentive Stock Plan, which appears as Exhibit 10(p) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1991, which Exhibit is incorporated herein by reference. 10(q). Registrant's 1995 Incentive Stock Plan, which appears as Appendix A to Registrant's Proxy Statement dated January 13, 1995, which Appendix is incorporated herein by reference. 11-12. None. 13. Pages 23-45 (excluding order data and "Statement of Management Responsibility") and 48 and the inside back cover of Registrant's 1994 Annual Report to Shareholders. 14-17. Not applicable. 18 EXHIBIT NUMBER EXHIBIT - ------- ------- 18. None. 19-20. Not applicable. 21. Subsidiaries of Registrant as of January 16, 1995. 22. None. 23. Consent of Independent Accountants. 24. Powers of Attorney. Contained in page 12 of this Annual Report on Form 10-K and incorporated herein by reference. 25-26. Not applicable. 27. Financial Data Schedule. 28. None. 99. 1994 Employee Stock Purchase Plan Annual Report on Form 11-K. Exhibit Numbers may not correspond in all cases to those numbers in Item 601 of Regulation S-K because of special requirements applicable to EDGAR filers. EX-13 2 ANNUAL REPORT "SELECTED FINANCIAL DATA" 1 Exhibit 13 Selected Financial Data Unaudited - ------
For the years ended October 31 In millions except per share amounts and employees 1994 1993 1992 1991 1990 - --------------------------------------------------------------------------------------------------------------- U.S. orders $11,692 $ 9,462 $ 7,569 $ 6,484 $ 6,143 International orders 13,658 11,310 9,192 8,192 7,342 ---------------------------------------------------------- Total orders $25,350 $20,772 $16,761 $14,676 $13,485 ---------------------------------------------------------- Net revenue $24,991 $20,317 $16,410 $14,494 $13,233 Earnings from operations $ 2,549 $ 1,879 $ 1,404 $ 1,210 $ 1,162 Earnings before effect of 1992 accounting change $ 1,599 $ 1,177 $ 881 $ 755 $ 739 Net earnings $ 1,599 $ 1,177 $ 549 $ 755 $ 739 [BAR CHART OMITTED] Per share: Earnings before effect of 1992 accounting change $ 6.14 $ 4.65 $ 3.49 $ 3.02 $ 3.06 Net earnings $ 6.14 $ 4.65 $ 2.18 $ 3.02 $ 3.06 Cash dividends paid $ 1.10 $ .90 $ .725 $ .48 $ .42 At year-end: Total assets $19,567 $16,736 $13,700 $11,973 $11,395 Employees 98,400 96,200 92,600 89,000 92,200 ---------------------------------------------------------- [BAR CHART OMITTED]
See discussion of the 1994 calculation of earnings-per-share on page 32 of this report. See discussion of the 1992 change in accounting for retiree medical benefits on page 39 of this report. Hewlett-Packard Company and Subsidiaries ------ 23 2 Consolidated Statement of Earnings - ------
For the years ended October 31 In millions except per share amounts 1994 1993 1992 - ------------------------------------------------------------------------------------------------------ Net revenue: Equipment $19,307 $15,533 $12,354 Services 5,684 4,784 4,056 ------------------------------------------- 24,991 20,317 16,410 ------------------------------------------- Costs and expenses: Cost of equipment sold 11,572 8,929 6,625 Cost of services 3,918 3,194 2,533 Research and development 2,027 1,761 1,620 Selling, general and administrative 4,925 4,554 4,228 ------------------------------------------- 22,442 18,438 15,006 ------------------------------------------- Earnings from operations 2,549 1,879 1,404 Interest income and other, net 29 25 17 Interest expense 155 121 96 ------------------------------------------- Earnings before taxes and effect of 1992 accounting change 2,423 1,783 1,325 Provision for taxes 824 606 444 ------------------------------------------- Earnings before effect of 1992 accounting change 1,599 1,177 881 Transition effect of 1992 accounting change, net of taxes -- -- 332 ------------------------------------------- Net earnings $ 1,599 $1,177 $ 549 =========================================== Earnings per share before effect of 1992 accounting change $6.14 $4.65 $3.49 Transition effect per share of 1992 accounting change, net of taxes -- -- 1.31 ------------------------------------------- Net earnings per share $6.14 $4.65 $2.18 ===========================================
The accompanying notes are an integral part of these financial statements. See discussion of the 1994 calculation of earnings-per-share on page 32 of this report. See discussion of the 1992 change in accounting for retiree medical benefits on page 39 of this report. Hewlett Packard Company and Subsidiaries - ------ 24 3 Financial Review Unaudited - ------ Results of Operations In 1994, HP again experienced excellent overall market acceptance of new products and achieved 23 percent growth in net revenue, despite some continuing economic weakness around the world. Moreover, favorable impacts from ongoing efforts to improve operating expense structures offset rising costs of sales, resulting in increased earnings from operations of 36 percent over 1993. [GRAPH OMITTED] HP's orders increased 22 percent over 1993, totaling $25.4 billion, compared with a 24 percent increase in 1993. Domestic and international orders grew 24 and 21 percent, respectively, reflecting HP's well-balanced position across a variety of geographic markets. In 1994, net revenue grew 23 percent in both the U.S. and internationally to $11.5 billion and $13.5 billion, respectively, following increases of 30 percent in the U.S. and 19 percent internationally in 1993. The U.S. dollar weakened during 1994 relative to most major foreign currencies, which had a minor impact on HP's international net revenue. Net revenue from equipment sales increased 24 percent in 1994 compared with 26 percent in 1993. Demand for the company's peripheral products, such as the HP LaserJet and HP DeskJet families of printers, continued to be excellent in 1994, which included the shipment of the 30 millionth HP printer. Orders for semiconductor- and communications-test equipment, multi-user computer systems based on the UNIX operating system and Vectra PCs also continued to be excellent in 1994. Sales of customer support services and consumable supplies for the company's printer products were strong and fueled the growth in services revenue of 19 percent in 1994 and 18 percent in 1993. Detailed information on orders and net revenue by groupings of similar products and services is presented on page 44 of this report. New products introduced during the year demonstrated HP's commitment to innovative technology and continuous product improvements. Many new products received strong acceptance in the marketplace during 1994 such as those from the HP LaserJet and HP DeskJet printer families, HP 9000 Series workstations and multiuser systems, and HP Vectra PCs. [GRAPH OMITTED] Costs, expenses and earnings as a percentage of net revenue were as follows: 4
For the years ended October 31 1994 1993 1992 - ------------------------------------------------------------------------------------------------------ Cost of equipment sold and services 62.0% 59.7% 55.8% Research and development 8.1% 8.7% 9.9% Selling, general and administrative 19.7% 22.4% 25.7% Earnings from operations 10.2% 9.2% 8.6% Earnings before effect of 1992 accounting change 6.4% 5.8% 5.4% Net earnings 6.4% 5.8% 3.3% - ------------------------------------------------------------------------------------------------------
Hewlett-Packard Company and Subsidiaries ------ 25 Financial Review Unaudited - ------ During 1994, cost of equipment sold and services as a percentage of net revenue increased 2.3 percentage points following a 3.9 percentage point increase in 1993. Pricing and other competitive pressures continued in 1994 and had a significant impact on cost of sales as a percentage of net revenue. Changes in the mix of products sold also continued to put upward pressure on cost of sales as a percentage of net revenue. In 1994, a higher portion of the company's net revenue was generated by sales through dealers and other indirect channels. Products, such as peripherals and PCs, sold through these channels generally carry higher discounts, thereby increasing cost of sales as a percentage of net revenue. These factors are likely to continue to put some upward pressure on the cost of sales ratio. Although the company again experienced upward pressures on its cost of sales, the growth in cost of sales as a percentage of net revenue slowed in 1994, partly as a result of HP's ongoing efforts to improve its cost structure by maximizing manufacturing efficiencies. [GRAPH OMITTED] Research and development expenditures increased 15 percent to $2.0 billion in 1994 versus $1.8 billion in 1993. The increased investment in research and development reflects the company's ongoing belief that success in a global marketplace requires a continuing flow of innovative, high-quality products. Research and development expenditures as a percentage of net revenue decreased .6 percentage points in 1994 compared with a 1.2 percentage point decrease in 1993. Selling, general and administrative expense as a percentage of net revenue decreased 2.7 percentage points to 19.7 percent of net revenue during 1994, following a 3.3 percentage point decrease in 1993. The decrease in selling, general and administrative expense as a percentage of net revenue is 5 attributable primarily to the company's ongoing cost control initiatives and continuing efforts to manage employment levels. Interest income and other, net was $29 million in 1994 compared to $25 million in 1993 and $17 million in 1992. Interest expense was $155 million in 1994 compared to $121 million in 1993 and $96 million in 1992. The increases in interest expense reflect increases in the level of debt outstanding, as well as interest rate changes during the respective periods. [GRAPH OMITTED] The company's effective tax rate was 34 percent in both 1994 and 1993, up slightly from 33.5 percent in 1992. A combination of factors led to the increase from 1992 to 1993, including an increase in the U.S. corporate federal income tax rate, changes in the geographic mix of the company's earnings, and resolution of certain issues related to tax returns filed in prior years. Net earnings increased 36 percent to $1.6 billion in 1994. This compares to a 34 percent increase in 1993 and a 17 percent increase in 1992, excluding the 1992 one-time charge of $332 million after income taxes for a change in accounting for retiree medical benefits. As a percentage of net revenue, net earnings were 6.4 percent in 1994 compared with 5.8 percent in 1993 and 5.4 percent in 1992, excluding the accounting change. Hewlett-Packard Company and Subsidiaries - ------ 26 Financial Review Unaudited - ------ In fiscal 1994, net earnings per share were computed based on a method which approximates the use of a weighted-average number of common shares and common share equivalents outstanding during the period. Common share equivalents represent the dilutive effect of outstanding stock options. In previous periods, common share equivalents were not included as their effect was considered immaterial. The inclusion of these equivalents in fiscal 1994 reduced earnings per share by 15 cents. Average shares outstanding used to compute earnings per share were 260.4 million in 1994, 253.2 million in 1993 and 252.6 million in 1992. The increases in shares outstanding resulted from the inclusion, in 1994, of common share equivalents, and issuances of common stock to employees under various stock plans, partially offset by stock acquired by the company under its ongoing share repurchase program. [BAR CHART OMITTED] Financial Condition and Liquidity 6 HP's financial position remains strong, with cash and cash equivalents and short-term investments of $2.5 billion at October 31, 1994, compared with $1.6 billion at October 31, 1993, and $1.0 billion at October 31, 1992. Operating activities generated $2.2 billion in cash in 1994, compared with $1.1 billion and $1.3 billion in 1993 and 1992, respectively. The increase in cash generated from operations in 1994 compared to 1993 is primarily attributable to higher net earnings before depreciation and amortization and slower inventory growth. Inventory as a percentage of net revenue declined from 18.2 percent in 1993 to 17.1 percent in 1994. The lower growth rate is attributable to the company's effort to enhance processes, with a focus on improving inventory turnover, to accommodate business changes such as shorter product life cycles and rapid product ramp-ups. 1994 capital expenditures were $1.3 billion compared to $1.4 billion and $1.0 billion in 1993 and 1992, respectively. The capital expenditures in 1994 relate mainly to expansion of production capacity and to accomodate the introduction of new products. The company invests excess cash in short-term and long-term investments depending on its projected cash needs for operations, capital expenditures and other business purposes. The company from time to time supplements its internally generated cash flow with a combination of short-term and long-term borrowings as required by various business and financial market factors. [BAR CHART OMITTED] Cash flow from changes in the company's debt structure resulted in net borrowings of $155 million in 1994 compared with net borrowings of $966 million and $416 million in 1993 and 1992, respectively. At October 31, 1994, the company had unused credit lines and authorized but unissued commercial paper totaling $3.1 billion. Shares are repurchased periodically to meet employee stock plan requirements. Approximately 4.0 million shares were purchased in 1994 at an aggregate price of approximately $325 million. In 1993, approximately 4.3 million shares were purchased at an aggregate price of approximately $314 million; and in 1992, approximately 7.7 million shares were purchased at an aggregate price of approximately $530 million. Additional stock repurchases, based on certain price and volume criteria, are authorized by the Board of Directors. At October 31, 1994, the remaining authorization was $255 million. Hewlett-Packard Company and Subsidiaries ------ 27 7 Consolidated Balance Sheet - ------
October 31 In millions except par value and number of shares 1994 1993 - ------------------------------------------------------------------------------------------ Assets Current assets: Cash and cash equivalents $ 1,357 $ 889 Short-term investments 1,121 755 Accounts and notes receivable 5,028 4,208 Inventories: Finished goods 2,466 2,121 Purchased parts and fabricated assemblies 1,807 1,570 Other current assets 730 693 ------------------------------- Total current assets 12,509 10,236 ------------------------------- Property, plant and equipment: Land 508 514 Buildings and leasehold improvements 3,472 3,254 Machinery and equipment 3,958 3,759 ------------------------------- 7,938 7,527 Accumulated depreciation (3,610) (3,347) ------------------------------- 4,328 4,180 Long-term receivables and other assets 2,730 2,320 ------------------------------- $19,567 $16,736 ============================== Liabilities and shareholders' equity Current liabilities: Notes payable and short-term borrowings $ 2,469 $ 2,190 Accounts payable 1,466 1,223 Employee compensation and benefits 1,256 1,048 Taxes on earnings 1,245 922 Deferred revenues 598 507 Other accrued liabilities 1,196 978 ------------------------------ Total current liabilities 8,230 6,868 ------------------------------ Long-term debt 547 667 Other liabilities 864 690 Shareholders' equity: Preferred stock, $1 par value (authorized: 300,000,000 shares; issued: none) -- -- Common stock and capital in excess of $1 par value (authorized: 600,000,000 shares; issued and outstanding: 254,827,000 in 1994 and 252,713,000 in 1993) 1,033 937 Retained earnings 8,893 7,574 ------------------------------ Total shareholders' equity 9,926 8,511 ------------------------------ $19,567 $16,736 ==============================
8 The accompanying notes are an integral part of these financial statements. Hewlett-Packard Company and Subsidiaries - ------ 28 Financial Review Unaudited - ------ Factors That May Affect Future Results The company's future operating results are dependent on the company's ability to rapidly develop, manufacture and market technologically innovative products that meet customers' needs. Inherent in this process are a number of risks that the company must successfully manage in order to achieve favorable operating results. The process of developing new high technology products is complex and uncertain and requires innovative designs that anticipate customer needs and technological trends. After the products are developed, the company must quickly manufacture products in sufficient volumes at acceptable costs to meet demand. [GRAPH OMITTED] In addition, a portion of the company's manufacturing operations is dependent on the ability of significant suppliers to deliver integral sub-assemblies and components in time to meet critical manufacturing schedules. The failure of suppliers to deliver these sub-assemblies and components in a timely manner may adversely affect the company's operating results until alternate sourcing could be developed. The company believes that alternate suppliers or design solutions could be arranged within a reasonable time so that material long-term adverse impacts would be unlikely. Changing industry practices and customer preferences require the company to expand into new distribution channels. As more of HP's products are distributed through dealer and other indirect channels, these channels become more critical to the company's success. Financial results could be adversely affected in the event that the financial condition of these sellers weakens. The operations of the company involve the use of substances regulated under various federal, state and international laws governing the environment. It is the company's policy to apply strict standards for environmental protection to sites inside and outside the U.S., even if not subject to regulations imposed 9 by local governments. Liability for environmental remediation is accrued when it is considered probable and costs can be estimated. Environmental expenditures are presently not material to HP's operations or financial position. [GRAPH OMITTED] A portion of the company's research and development activities, its corporate headquarters and other critical business operations are located near major earthquake faults. The ultimate impact on the company, significant suppliers and the general infrastructure is unknown, but operating results could be materially affected in the event of a major earthquake. The company is predominantly self-insured for losses and interruptions caused by earthquakes. Although HP believes that it has the product offerings and resources needed for continued success, future revenue and margin trends cannot be reliably predicted and may cause the company to adjust its operations. Factors external to the company can result in volatility of the company's common stock price. Because of the foregoing factors, recent trends should not be considered reliable indicators of future stock prices or financial results. Hewlett-Packard Company and Subsidiaries ------ 29 10 Consolidated Statement of Cash Flows - ------
For the years ended October 31 In millions 1994 1993 1992 - --------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net earnings $ 1,599 $ 1,177 $ 549 Adjustments to reconcile net earnings to cash provided by operating activities: Transition effect of 1992 accounting change -- -- 332 Depreciation and amortization 1,006 846 673 Deferred taxes on earnings (156) (137) (35) Changes in assets and liabilities: Accounts and notes receivable (848) (709) (480) Inventories (582) (1,056) (267) Accounts payable 243 283 226 Taxes on earnings 320 452 31 Other current assets and liabilities 585 200 328 Other, net 57 86 (69) -------------------------------------------------- 2,224 1,142 1,288 -------------------------------------------------- Cash flows from investing activities: Investment in property, plant and equipment (1,257) (1,405) (1,032) Disposition of property, plant and equipment 291 215 183 Purchase of short-term investments (2,758) (1,634) (782) Maturities of short-term investments 2,392 1,283 883 Purchase of long-term investments (332) (22) (53) Maturities of long-term investments 47 22 4 Acquisitions, net of cash acquired (62) (86) (411) Other, net 69 23 (58) -------------------------------------------------- (1,610) (1,604) (1,266) -------------------------------------------------- Cash flows from financing activities: Increase in notes payable and short-term borrowings 250 807 186 Issuance of long-term debt 64 387 309 Payment of current maturities of long-term debt (159) (228) (79) Issuance of common stock under employee stock plans 300 308 293 Repurchase of common stock (325) (314) (530) Dividends (280) (228) (183) Other, net 4 (22) (2) -------------------------------------------------- (146) 710 (6) -------------------------------------------------- Increase in cash and cash equivalents 468 248 16 Cash and cash equivalents at beginning of year 889 641 625 -------------------------------------------------- Cash and cash equivalents at end of year $ 1,357 $ 889 $ 641 ================================================== The accompanying notes are an integral part of these financial statements. Hewlett-Packard Company and Subsidiaries - ------ 30
11 Consolidated Statement of Shareholders' Equity - ------
Common Stock ---------------------------------------------- Par value and capital Number of in excess Retained In millions except number of shares in thousands shares of par earnings Total - --------------------------------------------------------------------------------------------------------- Balance October 31, 1991 251,547 $1,010 $6,259 $7,269 Employee stock plans: Shares issued 6,960 394 -- 394 Shares purchased (7,683) (530) -- (530) Dividends -- -- (183) (183) Net earnings -- -- 549 549 ---------------------------------------------- Balance October 31, 1992 250,824 874 6,625 7,499 Employee stock plans: Shares issued 6,234 377 -- 377 Shares purchased (4,345) (314) -- (314) Dividends -- -- (228) (228) Net earnings -- -- 1,177 1,177 ---------------------------------------------- Balance October 31, 1993 252,713 937 7,574 8,511 Employee stock plans: Shares issued 6,142 421 -- 421 Shares purchased (4,028) (325) -- (325) Dividends -- -- (280) (280) Net earnings -- -- 1,599 1,599 ---------------------------------------------- Balance October 31, 1994 254,827 $1,033 $8,893 $9,926 ==============================================
The accompanying notes are an integral part of these financial statements. Hewlett-Packard Company and Subsidiaries ------ 31 12 Notes to Consolidated Financial Statements - ------ Summary of Significant Accounting Policies - ----------------------------------------------------------------------------- Principles of consolidation The consolidated financial statements include the accounts of Hewlett-Packard Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Revenue recognition Revenue from equipment sales is generally recognized at the time the equipment is shipped. Services revenue is recognized over the contractual period or as services are performed. Taxes on earnings Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Net earnings per share In fiscal 1994, net earnings per share are computed based on a method that approximates the use of a weighted-average number of common shares and common share equivalents outstanding during each period. Common share equivalents represent the dilutive effect of outstanding stock options. In previous periods, common share equivalents were not included as their effect was considered immaterial. Shares used in the computation were 260,388,000 in 1994, 253,230,000 in 1993 and 252,600,000 in 1992. Short-term investments Short-term investments are principally comprised of cash invested in certificates of deposit, temporary money-market instruments and repurchase agreements and are stated at cost, which approximates market. Inventories Inventories are valued at standard costs that approximate actual costs computed on a first-in, first-out basis, not in excess of market values. Property, plant and equipment Property, plant and equipment are stated at cost. Additions, improvements and major renewals are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. Depreciation is provided using accelerated methods, principally over the following useful lives: buildings and improvements, 15 to 40 years; machinery and equipment, 3 to 10 years. Depreciation of leasehold improvements is provided using the straight-line method over the life of the lease or the asset, whichever is shorter. Foreign currency translation 13 The company uses the U.S. dollar as its functional currency. Foreign currency assets and liabilities are translated into U.S. dollars at end-of-period exchange rates except for inventories, deposits, and property, plant and equipment, which are translated at historical exchange rates. Revenues and expenses are translated at average exchange rates in effect during each period except for those expenses related to balance sheet amounts, which are translated at historical exchange rates. Gains or losses from foreign currency translation are included in net earnings. Statement of cash flows The company has classified investments as cash equivalents if the original maturity of such investments is three months or less. The company paid income taxes of $626 million in 1994, $293 million in 1993 and $459 million in 1992. For the same periods, the company paid interest of $143 million, $109 million and $84 million, respectively. The effect of foreign currency exchange rate fluctuations on cash balances denominated in foreign currencies was not material. Reclassifications Certain amounts have been reclassified to conform to the 1994 presentation. Hewlett-Packard Company and Subsidiaries - ------ 32 Acquisitions - ------------------------------------------------------------------------------ The company acquired several companies during 1994, 1993 and 1992. These acquisitions were not significant to the financial position or results of operations of the company. All of these acquisitions were accounted for using the purchase method. Under the purchase method, the results of operations of acquired companies are included prospectively from the date of acquisition, and the acquisition cost is allocated to the acquirees' assets and liabilities based upon their fair market values at the date of the acquisition. The excess of the acquisition cost over the fair market value of net assets acquired represents goodwill and amounted to $40 million and $71 million for the 1994 and 1993 acquisitions, respectively. At the end of fiscal year 1994, the net book value of goodwill associated with current and prior acquisitions was $528 million and is being amortized on a straight-line basis over 3 to 10 years. Financial Instruments - ------------------------------------------------------------------------------ Off-balance-sheet risk The company enters into foreign exchange contracts to hedge 14 against changes in foreign currency exchange rates. Such exposures are a result of the portion of the company's operations as well as assets and liabilities that are denominated in currencies other than the U.S. dollar. When the company's foreign exchange contracts hedge operational exposure, the effects of movements in currency exchange rates on these instruments are recognized when the related revenue and expenses are recognized. When foreign exchange contracts hedge balance sheet exposure, such effects are recognized when the exchange rate changes. Because the impact of movements in currency exchange rates on foreign exchange contracts offsets the related impact on the underlying items being hedged, these instruments do not subject the company to risk that would otherwise result from changes in currency exchange rates. Foreign exchange contracts require the company to exchange foreign currencies for U.S. dollars and generally mature within six months. The company had foreign exchange contracts of $2.5 billion and $3.0 billion outstanding at October 31, 1994 and 1993, respectively. The company enters into interest rate swap agreements to manage its exposure to interest rate changes. The transactions generally involve the exchange of fixed and floating interest payment obligations without the exchange of the underlying principal amounts. At October 31, 1994 and 1993, off-balance-sheet exposures under interest rate swap agreements were not material. Concentrations of credit risk Financial instruments that potentially subject the company to significant concentrations of credit risk consist principally of cash investments and trade accounts receivable. The company maintains cash and cash equivalents, short- and long-term investments and certain other off-balance-sheet financial instruments with various financial institutions. These financial institutions are located in many different geographies throughout the world, and company policy is designed to limit exposure with any one institution. As part of its cash management process, the company performs periodic evaluations of the relative credit standing of these financial institutions. Credit risk with respect to trade accounts receivable is generally diversified due to the large number of entities comprising the company's customer base and their dispersion across many different industries and geographies. The company performs ongoing credit evaluations of its customers' financial condition, utilizes flooring arrangements with third-party financing companies and requires collateral, such as letters of credit and bank guarantees, in certain circumstances. Hewlett-Packard Company and Subsidiaries ------ 33 15 The company sells a significant portion of its products through third-party resellers and, as a result, maintains individually significant receivable balances with major distributors. If the financial condition and operations of these distributors deteriorate below critical levels, the company's operating results could be adversely affected. The ten largest distributor receivable balances collectively represented 10 percent and 9 percent of total accounts and notes receivable at October 31, 1994 and 1993, respectively. Fair value of financial instruments For certain of the company's financial instruments, including cash and cash equivalents, short-term investments, accounts and notes receivable, notes payable and short-term borrowings, accounts payable and other accrued liabilities, the carrying amounts approximate fair value due to their short maturities. Long-term floating rate notes and certificates of deposit are carried at amounts that approximate fair value. The estimated fair value of long-term debt is primarily based on quoted market prices, as well as borrowing rates currently available to the company for bank loans with similar terms and maturities. This fair value, when adjusted for unrealized gains and losses on related interest rate swap agreements, approximates the carrying amount of long-term debt. Consequently, such instruments are not included in the following table, which provides information regarding the estimated fair values of other financial instruments, both on and off-balance-sheet, at October 31:
1994 1993 ------------------- -------------------- Carrying Estimated Carrying Estimated In millions Amount Fair Value Amount Fair Value - ---------------------------------------------------------------------------------------------- Long-term stock investments $ 64 $ 75 $ 88 $106 Foreign exchange contracts, including options $(24) $(108) $ 32 $ 66 - ---------------------------------------------------------------------------------------------
The estimated fair value of long-term stock investments is based on quoted market prices. For foreign exchange contracts, including options, the estimated fair value is primarily based on quoted market prices for the same or similar instruments, adjusted where necessary for maturity differences. The estimated fair values may not be representative of actual values of the financial instruments that could have been realized as of year end or that will be realized in the future. Taxes on Earnings - ------------------------------------------------------------------------------ The provision for income taxes is comprised of the following: 16
In millions 1994 1993 1992 - -------------------------------------------------------------------------------------------------- U.S. federal taxes: Current $511 $330 $248 Deferred (156) (46) (93) Non-U.S. taxes: Current 441 381 199 Deferred -- (91) 58 State taxes 28 32 32 -------------------------------------- $824 $606 $444 ======================================
Hewlett-Packard Company and Subsidiaries - ------ 34 17 The significant components of deferred tax assets and liabilities included on the balance sheet at October 31 are:
1994 1993 ------------------------ ----------------------------- Deferred Deferred Deferred Deferred tax tax tax tax In millions assets liabilities assets liabilities - ------------------------------------------------------------------------------------------------------------ Inventory $329 $ 28 $283 $ 28 Fixed assets 61 12 56 6 Retiree medical benefits 243 -- 234 -- Other retirement benefits -- 113 -- 116 Employee benefits, other than retirement 90 20 22 31 Leasing activities -- 79 -- 83 Other 254 198 193 163 ------------------------------------------------------- $977 $450 $788 $427 =======================================================
No valuation allowance was necessary in 1994 and 1993. Tax benefits of $41 million, $35 million and $28 million associated with the exercise of employee stock options were allocated to equity in 1994, 1993 and 1992, respectively. The company's average U.S. statutory tax rate increased to 35 percent in 1994 from 34.8 percent in 1993 and 34.0 percent in 1992 as a result of legislation enacted in August 1993 which was effective January 1, 1993. The effect on the company's deferred tax assets and liabilities was not material. The differences between the U.S. federal statutory income tax rate and the company's effective rate are as follows:
1994 1993 1992 - ---------------------------------------------------------------------------------------------------------- U.S. federal statutory income tax rate 35.0% 34.8% 34.0% State income taxes, net of federal tax benefit 0.8 1.1 1.6 Lower rates in other jurisdictions, net (4.8) (3.1) (4.1) Other, net 3.0 1.2 2.0 -------------------------------------- 34.0% 34.0% 33.5% ======================================
After allocating eliminations and corporate items, earnings before taxes are as follows:
In millions 1994 1993 1992 - ---------------------------------------------------------------------------------------------------------- U.S. operations including Puerto Rico $ 915 $ 818 $ 734 Non-U.S. 1,508 965 591 ------------------------------------------ $2,423 $1,783 $1,325 ==========================================
Hewlett-Packard Company and Subsidiaries ------ 35 18 The company has not provided for U.S. federal income and foreign withholding taxes on $2.2 billion of non-U.S. subsidiaries' undistributed earnings as of October 31, 1994, because such earnings are intended to be reinvested indefinitely. If these earnings were distributed, foreign tax credits should become available under current law to reduce or eliminate the resulting U.S. income tax liability. Where excess cash has accumulated in the company's non-U.S. subsidiaries and it is advantageous for tax or foreign exchange reasons, subsidiary earnings are remitted. As a result of certain employment and capital investment actions undertaken by the company, income from manufacturing activities in certain countries is subject to reduced tax rates, and in some cases is wholly exempt from taxes, for years through 2010. The income tax benefits attributable to the tax status of these subsidiaries are estimated to be $163 million, $128 million and $123 million for 1994, 1993 and 1992, respectively. The Internal Revenue Service (IRS) has completed its examination of the company's federal income tax returns filed through 1983. The IRS has not commenced its examination of returns for years subsequent to 1989. The company believes that adequate accruals have been provided for all years. Borrowings - ----------------------------------------------------------------------------- Notes payable and short-term borrowings are comprised of the following:
1994 1993 ----------------- ------------------ Interest Interest In millions rate rate - ------------------------------------------------------------------------------------ Commercial paper $1,155 5.1% $1,174 3.1% Notes payable to banks 1,090 5.1% 820 4.2% Other short-term borrowings 224 3.7% 196 3.2% ------ ------ $2,469 $2,190 ====== ======
The interest rates represent average rates in effect at October 31, 1994 and 1993. Long-term debt consists of corporate bonds placed with various financial institutions with interest rates ranging from 4.8 percent to 7.3 percent. The aggregate payments for the next five years of long-term debt outstanding at October 31, 1994 are $151 million in 1996, $158 million in 1999, and $238 million in 2000 and thereafter. At October 31, 1994, the company had unused lines of credit of $1.3 billion and authorized but unissued commercial paper of about $1.8 billion. The credit lines provide for borrowings on a 19 worldwide basis and generally do not require commitment fees. Hewlett-Packard Company and Subsidiaries - ------ 36 Shareholders' Equity Employee Stock Purchase Plan Eligible company employees may generally contribute up to 10 percent of their base compensation to the quarterly purchase of company stock under the Employee Stock Purchase Plan. Under this plan, employee contributions are partially matched with company contributions on a quarterly basis to purchase HP stock. At October 31, 1994, approximately 83,000 employees were eligible to participate and approximately 41,000 employees were participants in the plan. Incentive compensation plans The company has three principal stock option plans, adopted in 1979, 1985 and 1990. All plans permit options granted to qualify as "Incentive Stock Options" under the Internal Revenue Code. The exercise price of a stock option is generally equal to the fair market value of the company's common stock on the date the option is granted. Under the 1990 Incentive Stock Plan, however, the Executive Compensation and Stock Option Committee, in certain cases, may choose to establish a discounted exercise price at no less than 75 percent of fair market value on the grant date. In 1994 and 1993, discounted options totaling 216,000 shares and 741,000 shares, respectively, were granted at no less than 75 percent of fair market value on the grant date. Stock compensation expense related to the discounted options was not material. Options generally vest at a rate of 25 percent per year over a period of four years from the date of grant except for discounted options, which may not be exercised before the fifth anniversary of the option grant date, at which time such options become 100 percent vested. The plans provide for the granting of stock appreciation rights with respect to options granted to officers. The company has not included stock appreciation rights with options granted to officers since October 31, 1991. The following table summarizes option activity during 1994:
In thousands except Price price per share amounts Options per share - ------------------------------------------------------------------------- Outstanding at October 31, 1993 13,912 $27-81 Granted 2,109 56-88 Exercised (2,964) 27-85 Cancelled (221) 27-85 ------- ------- Outstanding at October 31, 1994 12,836 $27-88 ======= =======
20 At October 31, 1994, options to purchase 6,899,000 shares were exercisable at prices ranging from $27 to $88 per share. Shares available for option grants at October 31, 1994 and 1993 were 5,161,000 and 7,406,000, respectively. Approximately 47,000 employees were considered eligible to receive stock options in fiscal 1994. There were approximately 21,000 employees holding options under one or more of the option plans as of October 31, 1994. Hewlett-Packard Company and Subsidiaries ------ 37 Under the 1985 Incentive Compensation Plan and the 1990 Incentive Stock Plan, certain key employees may be granted cash or restricted stock awards. Cash and restricted stock awards are independent of option grants and are subject to restrictions considered appropriate by the company's Executive Compensation and Stock Option Committee. The majority of the shares of restricted stock outstanding at October 31, 1994 are subject to forfeiture if employment terminates prior to five years from the date of grant. During that period, ownership of the shares cannot be transferred. Restricted stock has the same dividend and voting rights as other common stock and is considered to be currently issued and outstanding. The cost of the awards, determined to be the fair market value of the shares at the date of grant, is expensed ratably over the period the restrictions lapse. Such expense was not material in 1994, 1993 or 1992. At October 31, 1994 and 1993, the company had 482,000 and 276,000 shares, respectively, of restricted stock outstanding. Shares reserved The company has reserved shares for future issuance under the employee stock plans. At October 31, 1994 and 1993, 29,709,000 and 35,797,000 shares, respectively, were reserved. Stock repurchase program Under the company's stock repurchase program, shares of HP common stock are periodically purchased to meet future employee stock plan requirements. In 1994, 1993 and 1992, 4,028,000, 4,345,000 and 7,683,000 shares were repurchased for an aggregate purchase price of $325 million, $314 million and $530 million, respectively. At October 31, 1994, HP had authorization for an aggregate of $255 million in future repurchases under this program based on certain price and volume criteria. Retirement Plans and Retiree Medical Benefits - ----------------------------------------------------------------------------- Pension and profit-sharing plans Substantially all of the company's employees are covered under various pension and deferred profit-sharing retirement plans. The worldwide pension and deferred profit-sharing costs were $196 million in 1994, $159 million in 1993, and $138 million in 1992. 21 Through October 31, 1993, U.S. employees were provided retirement benefits under the U.S. Deferred Profit-Sharing Plan (DPS) and the U.S. Supplemental Pension Plan (SPP). The DPS was a defined contribution plan that provided the vast majority of retirement benefits. The plan was funded solely by the company through an annual contribution based upon the company's adjusted U.S. net income, as defined in the plan agreement. The SPP was a defined benefit plan that provided for any excess of defined minimum benefits over the benefits available from the DPS. The amount of the benefit was computed based upon the employee's highest average pay rate and length of service, reduced by the annuity value to which the employee was entitled under the DPS. The DPS and SPP were substantially amended effective October 29, 1993, such that all accrued pension benefits under these plans were immediately 100 percent vested. This amendment resulted in SPP prior service cost of $69 million. Additionally, the accumulated benefit obligation and projected benefit obligation increased by approximately $3 million and $69 million, respectively. Effective November 1, 1993, the DPS assets were frozen and the SPP was modified and renamed the Hewlett-Packard Company Retirement Plan (Retirement Plan). Benefits under the amended plan continue to be based upon the employee's highest average pay rate and length of service. Employees retained benefits earned through October 31, 1993 under the DPS and SPP with benefits under the SPP adjusted for future salary increases. Assets of the Retirement Plan, previously the SPP, and the DPS are held in trust for the sole benefit of employees. Hewlett-Packard Company and Subsidiaries - ------ 38 The status of the U.S. Retirement and DPS plans follows:
In millions 1994 1993 - ------------------------------------------------------------- Fair value of plan assets $2,093 $2,096 Retirement benefit obligation $1,977 $1,872 - -------------------------------------------------------------
Employees outside the U.S. generally receive retirement benefits under various defined benefit and defined contribution plans based upon factors such as years of service and employee compensation levels. Retiree medical plan In addition to providing pension benefits, the company also has a medical plan that provides defined benefits to U.S. retired employees. Substantially all of the company's U.S. employees could become eligible for these benefits. 22 The company adopted, effective as of the beginning of the 1992 fiscal year, Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." SFAS No. 106 requires that postretirement benefits other than pensions be accounted for using the accrual method. The adoption of SFAS No. 106 in 1992 resulted in a one-time charge to net earnings of $332 million in the first quarter, after a reduction for income taxes of $212 million, representing the transition effect of adopting SFAS No. 106 as of the beginning of 1992. An increase in the discount rate and changes in benefit elections made by the plan participants resulted in a decrease in the benefit obligation and an increase in the unrecognized net experience gain at October 31, 1994. Additionally, effective January 1, 1994, the plan was amended such that all benefits for retirees age 65 and over are coordinated with Medicare on a carve-out basis. This amendment resulted in an unrecognized prior service gain and a decrease in the benefit obligation. 401(k) Plan U.S. employees of the company may participate in the Tax Saving Capital Accumulation Plan (TAXCAP), which was established as a supplemental retirement program. Under the TAXCAP program, the company matches contributions by employees up to a maximum of 4 percent of an employee's annual compensation. Effective November 1, 1993, the maximum combined contribution to the Employee Stock Purchase Plan and TAXCAP is 17 percent of an employee's annual base compensation subject to certain regulatory and plan limitations. Previously, the combined contributions to these two plans by an employee could not exceed 12 percent of an employee's annual base compensation. At October 31, 1994, 47,000 employees were participating in TAXCAP out of the 56,000 who were eligible. Hewlett-Packard Company and Subsidiaries ------ 39 23 Funded status and net periodic cost The funded status of the defined benefit and retiree medical plans is as follows:
U.S. defined Non-U.S. defined U.S. retiree benefit plan benefit plans medical plan ---------------- ----------------- ----------------- In millions 1994 1993 1994 1993 1994 1993 - ----------------------------------------------------------------------------------------------------------- Fair value of plan assets $ 310 $ 307 $ 933 $ 798 $ 258 $ 251 Benefit obligation (194) (83) (1,015) (851) (328) (444) ----------------------------------------------------------- Excess of plan assets over benefit obligation 116 224 (82) (53) (70) (193) Unrecognized net experience (gain) loss (52) (77) 85 69 (203) (57) Unrecognized prior service cost related to plan changes 63 69 33 28 (183) (181) Unrecognized net transition asset* (47) (54) (6) (7) -- -- ----------------------------------------------------------- Prepaid (accrued) costs $ 80 $ 162 $ 30 $ 37 $(456) $(431) =========================================================== Vested benefit obligation $ (47) $ (19) $(656) $(529) Accumulated benefit obligation $ (47) $ (19) $(706) $(576) ======================================
* Amortized over 15 years for the U.S. plan and over periods ranging from 12 to 20 years for non-U.S. plans. Plan assets consist primarily of listed stocks and bonds for the U.S. plans and listed stocks, bonds and cash surrender value of life insurance policies for the non-U.S. plans. It is the company's practice to fund these costs to the extent they are tax-deductible. The company's net pension, deferred profit-sharing and retiree medical costs are comprised of the following:
Pension and deferred profit-sharing ------------------------------------ U.S. retiree U.S. plans Non-U.S. plans medical plan ----------------------- ------------------------ ----------------------- In millions 1994 1993 1992 1994 1993 1992 1994 1993 1992 - ---------------------------------------------------------------------------------------------------------- Service cost-benefits earned during the period $112 $ 4 $ 3 $ 73 $ 61 $ 52 $ 27 $ 28 $ 26 Interest cost on benefit obligation 6 3 3 58 49 45 33 35 33 Actual investment return on plan assets (7) (45) (19) (44) (107) 5 (7) (40) (14) Net amortization and deferral (29) 11 (14) (16) 59 (53) (27) 10 (13) ---------------------------------------------------------------------------- Net plan cost (credit) 82 (27) (27) 71 62 49 26 33 32 Pension and deferred profit-sharing costs for other plans -- 88 69 43 36 47 -- -- -- ---------------------------------------------------------------------------- $ 82 $ 61 $ 42 $114 $ 98 $ 96 $ 26 $ 33 $ 32 ============================================================================
Hewlett-Packard Company and Subsidiaries - ------ 40 24 The assumptions used to measure the benefit obligations and to compute the expected long-term return on assets for the company's defined benefit and retiree medical plans are as follows:
1994 1993 1992 - ----------------------------------------------------------------------------------------------------------- U.S. defined benefit plan: Discount rate 8.0% 7.0% 8.0% Average increase in compensation levels 5.5% 5.5% 6.5% Expected long-term return on assets 9.0% 9.0% 9.0% Non-U.S. defined benefit plans: Discount rate 5.0% to 8.8% 5.0% to 9.0% 5.0% to 9.0% Average increase in compensation levels 4.1% to 7.0% 4.5% to 6.3% 4.5% to 6.3% Expected long-term return on assets 7.0% to 9.5% 7.0% to 10.0% 7.0% to 11.0% Retiree medical plan: Discount rate 8.0% 7.0% 8.0% Expected long-term return on assets 9.0% 9.0% 9.0% Current medical cost trend rate 10.8% 11.2% 13.0% Ultimate medical cost trend rate 6.0% 6.0% 7.0% Medical cost trend rate decreases to ultimate rate in year 2007 2007 2007 Effect of a 1% increase in the medical cost trend rate (millions): Increase in benefit obligation $66 $97 $88 Increase in the annual retiree medical cost $13 $18 $17 - ------------------------------------------------------------------------------------------------------
Commitments - ------------------------------------------------------------------------------ The company leases certain real and personal property. Minimum commitments under these operating leases are $157 million for 1995, $128 million for 1996, $96 million for 1997, $80 million for 1998, $50 million for 1999 and $171 million for 2000 through 2061. Certain leases require the company to pay property taxes, insurance and routine maintenance and include escalation clauses. Rent expense was $274 million in 1994, $269 million in 1993 and $257 million in 1992. Geographic Area Information - ------------------------------------------------------------------------------ The company operates in a single industry segment: the design, manufacture and service of measurement, computation and communications products and systems. Net revenue, earnings from operations and identifiable assets, classified by the major geographic areas in which the company operates, are as follows: Hewlett-Packard Company and Subsidiaries ------ 41 25
In millions 1994 1993 1992 - ------------------------------------------------------------------------------------------------------- Net revenue United States: Unaffiliated customer sales $11,469 $ 9,346 $ 7,212 Interarea transfers 4,653 4,249 3,436 ----------------------------------------- 16,122 13,595 10,648 ----------------------------------------- Europe: Unaffiliated customer sales 8,423 7,177 6,083 Interarea transfers 1,058 899 649 ----------------------------------------- 9,481 8,076 6,732 ----------------------------------------- Asia Pacific, Canada, Latin America: Unaffiliated customer sales 5,099 3,794 3,115 Interarea transfers 2,765 2,165 1,120 ----------------------------------------- 7,864 5,959 4,235 ----------------------------------------- Eliminations (8,476) (7,313) (5,205) ----------------------------------------- $24,991 $20,317 $16,410 ========================================= Earnings from operations United States $ 1,472 $ 1,485 $ 1,155 Europe 660 447 308 Asia Pacific, Canada, Latin America 824 630 372 Eliminations and corporate (407) (683) (431) ----------------------------------------- $ 2,549 $ 1,879 $ 1,404 ========================================= Identifiable assets United States $ 9,848 $ 8,984 $ 7,309 Europe 4,991 4,452 3,869 Asia Pacific, Canada, Latin America 4,052 3,056 2,026 Eliminations and corporate 676 244 496 ----------------------------------------- $19,567 $16,736 $13,700 =========================================
Net revenue from sales to unaffiliated customers is based on the location of the customer. Interarea transfers are sales among HP affiliates principally made at market price, less an allowance primarily for subsequent manufacturing and/or marketing costs. Earnings from operations and identifiable assets are classified based on the location of the company's facilities. Identifiable corporate assets, which are net of eliminations, comprise primarily cash, property, plant and equipment, and other assets, and aggregate $4,594 million in 1994, $3,148 million in 1993 and $2,889 million in 1992. Hewlett-Packard Company and Subsidiaries - ------ 42 26 ["STATEMENT OF MANAGEMENT RESPONSIBILITY" OMITTED] Report of Independent Accountants - ------ To the Shareholders and Board of Directors of Hewlett-Packard Company In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of earnings, of cash flows and of shareholders' equity present fairly, in all material respects, the financial position of Hewlett-Packard Company and its subsidiaries at October 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended October 31, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in the Retirement Plans and Retiree Medical Benefits note to the financial statements, the company changed its method of accounting for retiree medical benefits in the year ended October 31, 1992. We concur with this change in accounting. [SIGNATURE OF PRICE WATERHOUSE LLP OMITTED] San Francisco, California November 21, 1994 Hewlett-Packard Company and Subsidiaries ------ 43 27 Orders and Net Revenue by Groupings of Similar Products and Services Unaudited - ------
For the years ended October 31 In millions 1994 1993 1992 - ----------------------------------------------------------------------------------------------------------- Orders Computer products, service and support $19,882 $15,903 $12,293 Electronic test and measurement instrumentation, systems and service 2,759 2,335 2,257 Medical electronic equipment and service 1,170 1,196 1,004 Analytical instrumentation and service 777 721 678 Electronic components 762 617 529 ------------------------------------- $25,350 $20,772 $16,761 ===================================== Net revenue Computer products, service and support $19,632 $15,572 $12,028 Electronic test and measurement instrumentation, systems and service 2,722 2,318 2,207 Medical electronic equipment and service 1,141 1,149 1,010 Analytical instrumentation and service 754 704 693 Electronic components 742 574 472 ------------------------------------ $24,991 $20,317 $16,410 ====================================
The table above provides supplemental information showing orders and net revenue by groupings of similar products and services. The groupings are as follows: Computer products, service and support Computer equipment and systems (hardware and software), networking products, printers, plotters, scanners, disk and tape drives, terminals and handheld calculators; support and maintenance services, parts and supplies. Products are used for business, scientific and industrial applications. Electronic test and measurement instrumentation, systems and service Instruments and measurement systems used for design, production and maintenance of electronic equipment; support and maintenance services. Medical electronic equipment and service Instruments and information systems used for patient care monitoring; diagnostic cardiology; computer equipment, systems integration and application software; support and maintenance services; hospital supplies. Analytical instrumentation and service Gas and liquid chromatographs, mass spectrometers and spectrophotometers used to analyze chemical compounds; laboratory data and information management systems; support, supplies and maintenance services. 28 Electronic components Microwave semiconductor and optoelectronic devices that are sold primarily to manufacturers for incorporation into electronic products. Hewlett-Packard Company and Subsidiaries - ------ 44 Quarterly Summary Unaudited - ------
For the three months ended In millions except per share amounts January 31 April 30 July 31 October 31 - ------------------------------------------------------------------------------------------------------------------- 1994 U.S. orders $2,572 $2,937 $2,776 $3,407 International orders 3,570 3,431 3,185 3,472 --------------------------------------------------------- Total orders $6,142 $6,368 $5,961 $6,879 --------------------------------------------------------- Net revenue $5,682 $6,254 $6,053 $7,002 Cost of equipment sold and services $3,470 $3,890 $3,774 $4,356 Earnings from operations $ 598 $ 638 $ 543 $ 770 Net earnings $ 368 $ 408 $ 347 $ 476 Net earnings per share* $ 1.42 $ 1.56 $ 1.33 $ 1.83 Cash dividend paid per share $ .250 $ .250 $ .300 $ .300 Range of stock prices per share $71 1/2-87 1/2 $76-92 $72-81 7/8 $78 3/8-97 7/8 =============================================================== [BAR CHART OMITTED] 1993 U.S. orders $2,093 $2,341 $2,237 $2,791 International orders 3,108 3,026 2,466 2,710 -------------------------------------------------------------- Total orders $5,201 $5,367 $4,703 $5,501 -------------------------------------------------------------- Net revenue $4,573 $5,096 $4,961 $5,687 Cost of equipment sold and services $2,664 $2,997 $2,968 $3,494 Earnings from operations $ 421 $ 554 $ 427 $ 477 Net earnings $ 261 $ 347 $ 271 $ 298 Net earnings per share $ 1.03 $ 1.38 $ 1.06 $ 1.18 Cash dividend paid per share $ .200 $ .200 $ .250 $ .250 Range of stock prices per share $55 3/8-74 1/8 $67 3/8-78 1/4 $71-87 1/2 $65-75 5/8 ============================================================== [BAR CHART OMITTED]
*See discussion of the 1994 calculation of earnings-per-share on page 32 of this report. Hewlett-Packard Company and Subsidiaries ------ 45 29 Shareholder Information - ------ Annual Meeting of Shareholders The annual meeting will be held Tuesday, February 28, 1995, at 2 p.m. at Hewlett-Packard's Cupertino site located at 19447 Pruneridge Avenue, Cupertino, California. Annual Report/Form 10-K Publications of interest to current and potential HP investors are available upon request. These include annual and quarterly reports and the Form 10-K filed with the Securities and Exchange Commission. As a service to those with impaired vision, the HP 1994 Annual Report is available on audio cassette. This material can be obtained at no cost by contacting the Corporate Communications Department, Hewlett-Packard Company corporate offices. Transfer Agent and Registrar Harris Trust and Savings Bank Corporate Trust Operations Division, P.O. Box 755 Chicago, Illinois 60690 Telephone: (312) 461-4061 Common Stock, Dividend Policy The company's stock is traded on the New York Stock Exchange and the Pacific, Tokyo, London, Frankfurt, Zurich and Paris exchanges. Cash dividends have been paid each year since 1965. The current rate is $.30 per share per quarter. At November 30, 1994, there were 72,843 shareholders of record. - ------ 48 30 Corporate Information - ------ Headquarters 3000 Hanover Street Palo Alto, California 94304 Telephone: (415) 857-1501 Geographic Operations Americas 5301 Stevens Creek Boulevard Santa Clara, California 95052 Telephone: (408) 246-4300 Europe, Africa, Middle East Route du Nant-d'Avril 150 CH-1217 Meyrin 2 Geneva, Switzerland Telephone: (41/22)780-8111 Asia Pacific 17-21/F Shell Tower Times Square, 1 Matheson Street Causeway Bay, Hong Kong Telephone: (852) 599-7777 A directory of sales and support locations can be obtained from the Corporate Communications Department at HP's offices in Palo Alto. [SYMBOL OMITTED] Printed on recycled paper UNIX is a registered trademark in the United States and other countries, licensed exclusively through X/Open(TM) Company Limited. X/Open is trademark of X/Open Company Limited in the UK and other countries. HP-UX is based on and is compatible with Novell's UNIX operating system. It also complies with X/Open's XPG4, POSIX 1003.1, 1003.2; FIPS 151-1; and SVID2 interface specifications. Microsoft is a U.S. registered trademark of Microsoft Corp. Windows is a U.S. trademark of Microsoft Corp. Intel is a U.S. trademark of Intel Corp. Pentium is a U.S. trademark of Intel Corp. Designed and produced by Ted Williams Design Group, San Francisco 31 GRAPHICS APPENDIX LIST* * In this Appendix, the following descriptions of certain bar charts and graphs in the Company's 1994 Annual Report to Shareholders that are omitted from the EDGAR version are more specific with respect to the actual numbers, amounts and percentages than is determinable from the bar charts and graphs themselves. The Company submits such more specific descriptions only for the purpose of complying with the requirements for transmitting this Annual Report on Form 10-K electronically via EDGAR; such more specific descriptions are not intended in any way to provide information that is additional to the information otherwise provided in the Annual Report. EDGAR version - Page 23 A bar chart entitled "Net Earnings Per Share (In dollars)" at the top right of page 23 of the 1994 Annual Report to Shareholders shows that for the fiscal years 1990, 1991, 1992, 1993 and 1994 (shown on the x-axis) the Company had net earnings per share (shown on the y-axis) in the respective amounts provided in the table entitled "Selected Financial Data (Unaudited)" on page 23 of the Annual Report. In addition, the bar chart shows that in fiscal 1992, after the effect of a change in accounting for retiree medical benefits described on page 39 of the Annual Report, the Company had net earnings per share in an amount shown in such table. A bar chart entitled "Return on Average Shareholders' Equity (Percent)" at the bottom right of page 23 of the 1994 Annual Report to Shareholders shows that for the fiscal years 1990, 1991, 1992, 1993 and 1994 (shown on the x-axis) the Company had a return on average shareholders' equity (shown on the y-axis) of 12.5%, 11.1%, 11.7%, 14.7% and 17.3%, respectively. In addition, the bar chart shows that in fiscal 1992 the Company had a return on average shareholders' equity of 7.4% after the effect of a change in accounting for retiree medical benefits described on page 39 of the Annual Report. EDGAR version - Page 25 A graph entitled "Net Revenue (In millions)" at the top right of page 25 of the 1994 Annual Report to Shareholders shows that for the fiscal years 1990, 1991, 1992, 1993 and 1994 (shown on the x-axis) the Company had total net revenue (shown on the y-axis) in the respective amounts provided in the table entitled "Selected Financial Data (Unaudited)" on page 23 of the Annual Report; and international net revenue of $7,208 million, $8,104 million, $9,198 million, $10,971 million and $13,522 million, respectively. In addition, the graph shows that for the fiscal years 1990 and 1991 (shown on the x-axis) the company had U.S. net revenue (shown on the y-axis of $6,025 million and $6,390 million, respectively; and U.S. net revenue for the fiscal years 1992, 1993 and 1994 (shown on the x-axis) in the respective amounts (shown on the y-axis) provided in the section entitled "Geographic Area Information" in the notes on pages 41-42 of the Annual Report. 32 A graph entitled "U.S. Dollar Relative to Major Foreign Currencies (Fiscal 1980 equals 1.00)" at the bottom right of page 25 of the 1994 Annual Report to Shareholders shows that in the months running consecutively from October 1990 through October 1994 (shown on the x-axis) the U.S. Dollar was equal to (shown on the y-axis) .99, .98, 1.00, 1.00, .98, 1.06, 1.10, 1.11, 1.15, 1.15, 1.12, 1.10, 1.09, 1.06, 1.04, 1.04, 1.06, 1.09, 1.08, 1.06, 1.04, .99, .98, .99, 1.04, 1.11, 1.11, 1.14, 1.17, 1.17, 1.13, 1.13, 1.15, 1.19, 1.20, 1.16, 1.18, 1.21, 1.21, 1.21, 1.21, 1.19, 1.19, 1.17, 1.16, 1.13, 1.13, 1.11 and 1.09, respectively, multiplied by the currencies of the following foreign countries, with varying weights assigned to each of such currencies: Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, Netherlands, Norway, Spain, Sweden, Switzerland and United Kingdom. EDGAR version - Page 26 A graph entitled "Costs and Expenses (As a percentage of net revenue)" at the top left of page 26 of the 1994 Annual Report to Shareholders shows that for the fiscal years 1990 and 1991 (shown on the x-axis) the Company had (shown on the y-axis) cost of equipment sold and services of 52.8% and 54.2%, respectively, of net revenue; selling, general and administrative expenses of 28.1% and 27.4%, respectively, of net revenue; and research and development expenses of 10.3% and 10.1%, respectively, of net revenue. In addition, the graph shows that for the fiscal years 1992, 1993 and 1994 (shown on the x-axis) the Company had, as a percentage of net revenue (shown on the y-axis), cost of equipment sold and services, selling, general and administrative expenses and research and development expenses in the respective amounts provided in the table at the bottom of page 25 of the Annual Report. A graph entitled "Interest and Other, Net (In millions)" at the bottom left of page 26 of the 1994 Annual Report to Shareholders shows that for the fiscal years 1990 and 1991 (shown on the x-axis) the company had (shown on the y-axis) interest income and other, net of $66 million and $47 million, respectively; and interest expense of $172 million and $130 million, respectively. In addition, the graph shows that for the fiscal years 1992, 1993 and 1994 (shown on the x-axis) the company had (shown on the y-axis) interest income and other, net and interest expense in the respective amounts provided in the table entitled "Consolidated Statement of Earnings" on page 24 of the Annual Report. EDGAR Version - Page 27 A bar chart entitled "Net Earnings (In millions)" at the top right of page 27 of the 1994 Annual Report to Shareholders shows that for the fiscal years 1990, 1991, 1992, 1993 and 1994 (shown on the x-axis) the Company had net earnings (shown on the y-axis) in the respective amounts provided in the table entitled "Selected Financial Data (Unaudited)" on page 23 of the Annual Report. In addition, the bar chart shows that in fiscal 1992, after the effect of a change in accounting for retiree medical benefits described on page 39 of the Annual Report, the Company had net earnings in an amount provided in such table. 33 A bar chart entitled "Selected Cash Flows (In millions)" at the bottom right of page 27 of the 1994 Annual Report to Shareholders shows that for the fiscal years 1990 and 1991 (shown on the x-axis) the Company had cash flows from operating activities (shown on the y-axis) of $799 million and $1,552 million, respectively; capital expenditures of $955 million and $862 million, respectively; and dividends paid of $102 million and $120 million, respectively. In addition, the bar chart shows that for the fiscal years 1992, 1993 and 1994 (shown on the x-axis) the Company had cash flows from operating activities and dividends paid (shown on the y-axis) in the respective amounts provided in the table entitled "Consolidated Statement of Cash Flows" on page 30 of the Annual Report. Finally, the bar chart shows that for the fiscal years 1992, 1993 and 1994 (shown on the x-axis) the Company had capital expenditures (shown on the y-axis) in the respective amounts shown as "Investment in property, plant and equipment" provided in the table entitled "Consolidated Statement of Cash Flows" on page 30 of the Annual Report. EDGAR Version - Page 29 A graph entitled "Asset Management (As a percentage of net revenue)" at the top right of page 29 of the 1994 Annual Report to Shareholders shows that for the fiscal years 1990, 1991, 1992, 1993 and 1994 (shown on the x-axis) the Company had (shown on the y-axis) net property, plant and equipment of 24.2%, 23.1%, 22.2%, 20.6% and 17.3%, respectively, of net revenue; accounts and notes receivable of 21.8%, 20.5%, 21.3%, 20.7% and 20.1, respectively, of net revenue; and inventories of 15.8%, 15.7%, 15.9%, 18.2% and 17.1, respectively. A graph entitled "Employees and Net Revenue Per Employee (In thousands)" at the bottom right of page 29 of the 1994 Annual Report to Shareholders shows that for the fiscal years 1990, 1991, 1992, 1993 and 1994 (shown on the x-axis) the Company had employees in the respective amounts (shown on the y-axis) provided in the table entitled "Selected Financial Data (Unaudited)" on page 23 of the Annual Report. In addition, the graph shows that for the fiscal years 1990, 1991, 1992, 1993 and 1994 (shown on the x-axis) the Company had net revenue per employee (shown on the y-axis) of $141,500, $160,000, $180,800, $215,200 and $256,900, respectively. EX-21 3 SUBSIDIARIES OF REGISTRANT AS OF JANUARY 16,1995. 1 EXHIBIT 21
Organized Under Laws of --------------- Domestic Subsidiaries of Hewlett-Packard Company Hewlett-Packard Delaware, Inc. Delaware Hewlett-Packard Delaware Capital, Inc. Delaware Hewlett-Packard Delaware Funding, Inc. Delaware Hewlett-Packard Delaware Holding, Inc. Delaware Hewlett-Packard Delaware Investment, Inc. Delaware Hewlett-Packard European Distribution Operations Netherlands, Inc. Delaware Hewlett-Packard Finance Company California Hewlett-Packard Global Trading, Inc. California Hewlett-Packard Hellas California Hewlett-Packard Inter-Americas California Hewlett-Packard Laboratories Japan, Inc. Delaware Hewlett-Packard Little Falls, Inc. Delaware Hewlett-Packard Pipeline Company Colorado Hewlett-Packard Puerto Rico California Hewlett-Packard World Trade, Inc. Delaware Apollo World Trade, Inc. Delaware Calan, Inc. Pennsylvania Cerjac, Inc. Delaware Four Pi Systems Corporation California HiNoon Project Corporation Delaware The Tall Tree Insurance Company Vermont Versatest, Inc. California Domestic Subsidiary of Hewlett-Packard Little Falls, Inc. Fleet Systems, Inc. California Domestic Subsidiary of Hewlett-Packard World Trade, Inc. Hewlett-Packard Export Trade Co. California
1 2
Organized Under Laws of --------------- Domestic Subsidiary of HiNoon Project Corporation Video Products Group Inc. Delaware Foreign Subsidiaries of Hewlett-Packard Company China Hewlett-Packard Company Limited People's Republic of China Grupo Hewlett-Packard S.A. de C.V. Mexico Hewlett-Packard Asia Pacific Limited Hong Kong Hewlett-Packard Australia Ltd. Australia Hewlett-Packard Bilgisayar Ve Olcum Sistemleri Anonim Sirketi Turkey Hewlett-Packard Hong Kong Ltd. Hong Kong Hewlett-Packard Ireland Ltd. Ireland Hewlett-Packard Medical Products (Qingdao) Limited People's Republic of China Hewlett-Packard Penang Sdn. Bhd. Malaysia Hewlett-Packard Portugal-Sistemas De Informatica E De Medida SA Portugal Hewlett-Packard Sales (Malaysia) Sdn. Bhd. Malaysia Hewlett-Packard Taiwan, Ltd. Republic of China Edisa Hewlett-Packard S.A. Brazil P.T. Hewlett-Packard Servisindo Indonesia Samsung Hewlett-Packard Ltd. Korea EEsof GmbH Germany EEsof K.K. Japan EEsof Pte. Ltd. Singapore Foreign Subsidiary of China Hewlett-Packard Company Limited China Hewlett-Packard (Shenzhen) Company, Ltd. People's Republic of China Foreign Subsidiaries of Grupo Hewlett-Packard S.A. de C.V. Arrendadora Hewlett-Packard S.A. de C.V. Mexico Hewlett-Packard de Mexico S.A. de C.V. Mexico
2 3
Organized Under Laws of --------------- Foreign Subsidiary of Hewlett-Packard Asia Pacific Ltd. Hewlett-Packard Australia Finance Ltd. Australia Foreign Subsidiaries of Hewlett-Packard Australia Ltd. Hewlett-Packard New Zealand Ltd. New Zealand Moriya Pty. Inc. Australia Foreign Subsidiaries of Hewlett-Packard Delaware, Inc. Hewlett-Packard Chile, S.A. Chile Hewlett-Packard de Venezuela, C.A. Venezuela Hewlett-Packard do Brasil, S.A. Brazil Hewlett-Packard Malaysia Technology, Sdn. Bhd. Malaysia Hewlett-Packard (Thailand) Limited Thailand Foreign Subsidiary of Hewlett-Packard Delaware Capital, Inc. HCL Hewlett-Packard Limited India Foreign Subsidiary of Hewlett-Packard Delaware Holding, Inc. Hewlett-Packard (India) Software Operation Private Ltd. India Foreign Subsidiary of Hewlett-Packard Delaware Investment, Inc. Hewlett-Packard India Ltd. India Foreign Subsidiary of Hewlett-Packard do Brasil, S.A. Edisa Hewlett-Packard S.A. Brazil
3 4
Organized Under Laws of --------------- Foreign Subsidiaries of Hewlett-Packard GmbH Hewlett-Packard CADE AG Switzerland Hewlett-Packard CADE GmbH Germany Hewlett-Packard Inter-Services GmbH Germany IDACOM Electronics GmbH Germany CAP debis Sfi-Systemhaus fuer Informations Verarbeitung GmbH Germany Foreign Subsidiaries of Hewlett-Packard Europe B.V. Hewlett-Packard A.O. Russia Hewlett-Packard (Canada) Ltd. Canada Hewlett-Packard Far East Pte. Ltd. Singapore Hewlett-Packard GmbH Germany Hewlett-Packard Holding B.V. Netherlands Hewlett-Packard Holdings (M) Sdn. Bhd. Malaysia Hewlett-Packard Israel Science Center Ltd. Israel Hewlett-Packard Italiana S.p.A. Italy Hewlett-Packard Ltd. Great Britain Hewlett-Packard Philippines Philippines Hewlett-Packard S.A. Switzerland Hewlett-Packard Singapore (Sales) Pte. Ltd. Singapore Technologies et Participations S.A. France Yokogawa Hewlett-Packard, Ltd. Japan Foreign Subsidiary of Hewlett-Packard Holdings (M) Sdn. Bhd. Hewlett-Packard Storage Products (M) Sdn. Bhd. Malaysia Foreign Subsidiaries of Hewlett-Packard Italiana S.p.A. Hewlett-Packard Servizi Finanziari Italy Italy NECSY Network Control Systems S.p.A. Italy
4 5
Organized Under Laws of --------------- Foreign Subsidiaries of Hewlett-Packard Ltd. Hewlett-Packard Avantek Ltd. Great Britain Hewlett-Packard Equipment Leasing Ltd. Great Britain Hewlett-Packard Finance Ltd. Great Britain Hewlett-Packard Leasing Ltd. Great Britain Hewlett-Packard Product Leasing Ltd. Great Britain Appollo Computer (UK) Ltd. Great Britain BT&D Technologies Ltd. Great Britain Colorado Memory Systems Europe Ltd. Great Britain EEsof Ltd. Great Britain Foreign Subsidiaries of Hewlett-Packard S.A. Hewlett-Packard Argentina S.A. Argentina Hewlett-Packard A/S Denmark Hewlett-Packard (Austria) Ges.m.b.H Austria Hewlett-Packard Belgium S.A.N.V. Belgium Hewlett-Packard Espanola, S.A. Spain Hewlett-Packard (Malaysia) Sdn. Bhd. Malaysia Hewlett-Packard Nederland B.V. Nederlands Hewlett-Packard Norge A/S Norway Hewlett-Packard OY Finland Hewlett-Packard (Schweiz) A.G. Switzerland Hewlett-Packard Singapore (Private) Ltd. Singapore Hewlett-Packard Sverige A.B. Sweden Hewlett-Packard Technical B.V. Netherlands Hewlett-Packard Trading S.A. Switzerland Foreign Subsidiary of Hewlett-Packard Singapore Private Ltd. Hewlett-Packard Investment Ltd. Liberia Geneva Investments N.V. Netherlands Antilles W.W. Investment Holding Pte. Ltd. Singapore
5 6
Organized Under Laws of --------------- Foreign Subsidiary of W.W. Investment Holding Pte. Ltd. W.W. Real Estate and Development Pte. Ltd. Singapore Foreign Subsidiary of W.W. Real Estate and Development Pte. Ltd. W-Wide Offshore Ventures Pte. Ltd. Singapore Foreign Subsidiaries of Hewlett-Packard World Trade, Inc. Hewlett-Packard Coordination Center S.A Belgium Hewlett-Packard Europe B.V. Netherlands Hewlett-Packard International Sales Corporation B.V. Netherlands Hewlett-Packard Magyarorszag Kft. Hungary Hewlett-Packard Polska Spol.Z Poland Hewlett-Packard RE Ltd. Ireland Hewlett-Packard s.r.o. Czech Republic Leasametric GmbH Germany Yokogawa Analytical Systems, Inc. Japan Foreign Subsidiary of Leasametric GmbH Leasametric S.A. France Foreign Subsidiaries of Technologies et Participations Hewlett-Packard France France Technologies et Participations Immobilieres France
6 EX-23 4 CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the following Registration Statements on Form S-8 of our report dated November 21, 1994 appearing on page 43 of the 1994 Annual Report to Shareholders of Hewlett-Packard Company which is incorporated in this Annual Report on Form 10-K. Registration No 2-66780 through Post-Effective Amendment No. 6 Registration No. 2-90239 Registration No. 2-92331 through Post-Effective Amendment No. 3 Registration No. 2-96361 through Post-Effective Amendment No. 1 Registration No. 33-30769 Registration No. 33-31496 Registration No. 33-31500 Registration No. 33-38579 Registration No. 33-50699 Registration No. 33-52291 [SIGNATURE OF PRICE WATERHOUSE LLP OMITTED] PRICE WATERHOUSE LLP San Francisco, California January 27, 1995 EX-27 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 12-MOS OCT-31-1994 NOV-01-1993 OCT-31-1994 1,357 1,121 5,028 0 4,273 12,509 7,938 3,610 19,567 8,230 547 1,033 0 0 8,893 19,567 19,307 24,991 11,572 15,490 6,952 0 155 2,423 824 1,599 0 0 0 1,599 6.14 0
EX-99 6 1994 EMPLOYEE STOCK PURCHASE PLAN-A/R ON FORM 11-K 1 EXHIBIT 99 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K (MARK ONE) [ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended October 31, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ______ to ______ Commission File Number: 1-4423 A. Full title of the plan and address of the plan, if different from that of the issuer named below: HEWLETT-PACKARD COMPANY EMPLOYEE STOCK PURCHASE PLAN B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: HEWLETT-PACKARD COMPANY 3000 HANOVER STREET PALO ALTO, CALIFORNIA 94304 REQUIRED INFORMATION Not applicable. SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE ADMINISTRATOR OF THE PLAN HAS DULY CAUSED THIS ANNUAL REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED. HEWLETT-PACKARD COMPANY EMPLOYEE STOCK PURCHASE PLAN Date: January 27, 1995 By: D. CRAIG NORDLUND ------------------------------------ D. Craig Nordlund Associate General Counsel and Secretary -----END PRIVACY-ENHANCED MESSAGE-----